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Asheville, North Carolina

Comprehensive Annual Financial Reportfor the Fiscal Year Ended June 30, 2007

Asheville City Schools

TABLE OF CONTENTS

INTRODUCTORY SECTION

Letter of Transmittal iASBO Certificate of Excellence viGFOA Certificate of Achievement viiOrganizational Chart viii

FINANCIAL SECTION

Independent Auditors' Report 1Management's Discussion and Analysis 3

Basic Financial Statements:Government-Wide Financial Statements:

Statement of Net Assets 12Statement of Activities 13

Fund Financial Statements:Balance Sheet--Governmental Funds 15Statement of Revenues, Expenditures, and Changes in Fund Balances--Governmental Funds 17Statement of Revenues, Expenditures, and Changes in Fund Balances--Budget and Actual--General Fund and

Annually Budgeted Major Special Revenue Fund 19Statement of Net Assets--Proprietary Fund 21Statement of Revenues, Expenses, and Changes in Net Assets--Proprietary Fund 22Statement of Cash Flows--Proprietary Fund 23Statement of Fiduciary Assets and Liabilities--Fiduciary Fund 25

Notes to the Financial Statements 26

Supplementary Information:Combining and Individual Fund Statements and Schedules:

Schedule of Revenues, Expenditures, and Changes in Fund Balance--Budget and Actual--Capital Outlay Fund 37Combining Balance Sheet--Other Governmental Funds 39Combining Statement of Revenues, Expenditures, and Changes in Fund Balances--Other Governmental Funds 40Schedule of Revenues, Expenditures, and Changes in Fund Balance--Budget and Actual--Federal Grants Fund 42Schedule of Revenues and Expenditures--Budget and Actual (Non-GAAP)--Child Nutrition Fund 43Combining Statement of Changes in Assets and Liabilities--Agency Fund 44Schedule of Capital Assets by Function and Source 45Schedule of Changes in Capital Assets by Function and Source 46

STATISTICAL SECTION

Net Assets by Component 47Expenses, Program Revenues and Net (Expense) 48General Revenues and Total Change in Net Assets 49Fund Balances - Governmental Funds 50Changes in Fund Balances - Governmental Funds 51Assessed Value of Taxable Property 52Direct and Overlapping Property Tax Rates 53Principal Property Tax Payers 54Property Tax Levies and Collections , 55Demographic and Economic Statistics for Buncombe County 56Principal Employers 57Number of Personnel 58Operating Statistics 59Teachers' Salaries 60School Building Information 61

Introductory SectIon

Introductory SectIon

Asheville City SchoolsAdministrative Offices • PO Box 7347 • 8.5 Mountain Street· Asheville, North Carolina 28802

LETTER OF TRANSMITIAI.

November 15. 2007

To the Members of the Asheville City Board of Education andCitizens of Asheville and Buncombe County. North Carolina

In compliance with the Pub!;c School Laws of North Carolina, TheComprehensive Annual Financial Report of The Asheville City Board ofEducation (Board), operating as the "Asheville City Schools," for thefiscal year ended June 30, 2007, is herewith submitted. Responsibilityfor the accuracy, completeness, and clarity of the report rests with ·theSuperintendent and the Assistant Superintendent for Business/SupportServices.

The report has been prepared by the Finance Department following therequirements and guidelines promulgated by the GovernmentalAccounting Standards Board. ·We believe the data presented is accuratein all material respects and that it is presented in a manner designed tofairly reflect the financial position and results of operations of the Board.All disclosures necessary to enable the reader to gain the maximumunderstanding of the Board's financial activity have been included.

REPORTING ENTITY

The Board is a Local Education Agency empowered by State law. [Chapter 115C of the North Carolina General ·Statutes (G.S.)J with th,e

responsibility to oversee and control all activities related to public schooleducation in Asheville, North Carolina. It was established in 1887 byaction of the state legislature. For fiscal year 2007, the Board operatednine schools that provided a continuum of service from birth· throughtwelfth grade. These schools include a preschool; one comprehensivehigh school, including the School of Inquiry and Life Sciences atAsheville (SILSA); one middle school; a small alternative middle/highschool; five elementary schools; and several alternativeclassrooms/programs. The average daily membership for the 2006-07school year was 3,730 -students.

Within the context of a strong system-wide curricular emphasis,Asheville City Schools offers 'parents a choice from among fiveelementary magnet schools. Each school has adopted a theme thatguides instructional decisions and strategies. The themes are Arts andHumanities; Human Diversity and Ecology; Core Knowledge; Science;Math and Technology; and Experiential Learning. The magnet themesprovide unique opportunities for students and their families to experiencea curriculum suited to their individual interests and needs.

The Asheville City Council is responsible for appointing the members ofthe Board for Asheville City Schools, but the City's accountability for theBoard does not extend beyond making those appointments. TheBuncombe County Board of Commissioners levies all taxes, but theAsheville City Board of Education determines how the school system willspend the funds generated for schools. The County cannot modify theschool system's budget, nor is the County entitled to share in any

surpluses or required to finance any deficits of the school system. Forthese reasons, the Board is not fiscally dependent on the County andtherefore is recognized as a primary government, as defined by theGovernmental Accounting Standards Board. The Board also receivesstate, local, and federal government funding and must comply with thelegal requirements of each funding agency.

In 1997, the North Carolina General Assembly passed legislation creatingcharter schools, an alternative to traditional public schools. Charterschools receive a per pupil allocation of local county funds as defined bythe legislation. Although the County funding for the charter schoolspasses through the Board, the Board has no authority or responsibilityrelated to the charter schools and, therefore, they are not a componentunit of the Board.

ACCOUNTING SYSTEM AND BUDGETARY CONTROL

Accounting records of the school system must be maintained in auniform state format. Monthly reports of transactions of state andfederal funds and details of disbursements from these funds aresubmitted to the North Carolina Department of Public Instruction forreview. Financial activities throughout the year are controlled inaccordance with the North Carolina School Budget and Fiscal ControlAct which requires a pre-audit procedure to ensure availability of fundsprior to the issuance of purchase orders or payment of claims. Webelieve that the Board's internal accounting controls adequatelysafeguard assets and provide reasonable assurance of proper recordingof financial transactions. The concept of reasonable assurancerecognizes that the cost of a control should not exceed the benefitslikely to be derived and the evaluation of cost and benefits requiresestimates and judgments by management. All internal controlevaluations occur within the above framework.

North Carolina General Statutes require all governmental units to adopt abalanced budget by July 1 of each year. The Board's annual budgetresolution authorizes expenditures by purpose or function on a modifiedaccrual basis. For internal management purposes, the budget is allocated

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by line item within each purpose or function. The Board also uses apurchase order encumbrance system that records encumbrancesoutstanding against each line item of expenditure. Outstandingencumbrances at the end of the fiscal year related to normal operationsare considered to be continuing contracts and are transferred at the endof the fiscal year to appropriations in future years.

ECONOMIC CONDITION AND OUTLOOK

The information presented in the financial statements is perhaps bestunderstood when it is considered from the broader perspective of thespecific environment within which the Board operates. The cost ofpublic school education in North Carolina is financed by the State, whichestablishes minimum programs. Local funds, in varying amounts bydistrict, supplement the basic program and are generated from thegeneral tax levies of the county. Some school districts, such as AshevilleCity Schools, have also established a supplemental tax levy through areferendum. These funds are collected by the County and passedthrough to the school district since local boards of education have nodirect tax levying or borrowing authority.

Asheville City Schools is located within Buncombe County and the City ofAsheville. Buncombe County and the City of Asheville serve as theeconomic and service center for a twenty-two county region. According tothe Asheville Area Chamber of Commerce, the Asheville metro area isexperiencing stable economic growth. A balance of forces, centeredaround the area's quality of life amenities, will continue to support thisdurable pattern.

Through the first quarter of 2007, the Asheville metro has participated in39 straight months of record-setting job levels. Over the year, 2,700 netnew jobs have been added. With current total employment of 173,000and a growth rate of 1.7 percent through the first quarter, Asheville ismaintaining a pace close to its historic average. At 3.7 percent,Asheville's unemployment rate holds well below the state, the nation,and all but two of North Carolina's 13 other metro areas.

Economic strength of the Asheville metro is being led by:

Record-setting professional services sectorSpecialized healthcare industryStable tourism activityResilient housing marketBaby-boom population growthRe-structured manufacturing sector

The strength of the local economy should help Asheville City Schoolsremain a strong and viable source for the education of its students.

FIVE-YEAR STRATEGIC PLAN

As the 2006-07 school year ended, Asheville City Schools was puttingthe finishing touches on a new strategic plan that will guide the districtinto a new decade. The plan contains five new goals, each reflective ofthe 21 st Century global economy:

Asheville City Schools will produce globally competitivestudents.21 st Century professionals will lead and teach in Asheville CitySchools.Asheville City Schools' students will be healthy, responsible andengaged in positive relationships.District Leadership will guide innovation and continuousimprovement in Asheville City Schools through collaboration andpartnership with all stakeholders.Asheville City Schools will use 21 st Century systems to fosterefficiency, accountability and communication.

The new plan contains 27 "desired outcomes" and 50 major strategies.Input was gathered in a March 2007 survey of more than 3,000stakeholders and at a Community Conversation event held in May 2007.

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Meanwhile, the district made significant academic and efficiency gainsduring the 2006-07 school year:

Asheville High School outpaced the state in every demographicrelated to graduation. Of the students who enrolled at AshevilleHigh School in 2003, 77% graduated in 2007, a 14 percentagepoint increase over the prior year.Nine of nine schools met or exceeded expected growth underNorth Carolina's ABCs standards.Math and reading scores improved in grades 3-8 and theachievement gap narrowed.62.5% of the district's schools met the tough, all-or-nothingAdequate Yearly Progress (AYP) standards under No Child LeftBehind; 44.6% of the state's schools achieved this standard.Asheville High seniors outpaced the nation by 50 points on the2007 SAT with a high participation rate of 80%.The new Freshman Experience program at Asheville High Schoolcombined with an expanding Advancement Via IndividualDetermination (AVID) program and the innovative School ofInquiry and Life Sciences netted fewer absences, less dropouts,better grades and a reduction in disciplinary actions.Asheville High School's Childcare program advanced to a 4-Starrating while the award-winning Asheville City Schools Preschoolsustained its 5-Star status.The system was awarded a $500,000 + IMPACTING SchoolLeadership Grant and became a partner in the $480,000 +regional Safe Schools Consortium.With 1,674 computers, 480 phones, 3,000 ethernet jacks and2,000 Cisco ports - all connected with fiber optics - AshevilleCity maintained its position as a leader in school technology.Asheville City Schools contributed $32,000 to the community's2006 United Way Campaign.The extensive renovation of Claxton Elementary School wascompleted in 2006-07. A new and multi-faceted cafeteria atAsheville High School came online for the 2006-07 school yearand work commenced on major repairs/updates at Asheville HighSchool.

CASH MANAGEMENT

The Board uses a pooled cash concept to maximize funds available forinvestment. Temporary idle cash from the General Fund, Capital OutlayFund, Child Nutrition Fund, and Individual Schools Fund is invested invarious instruments according to applicable state law. Funds from theState Public School and Federal Grants Funds are not available to theBoard until warrants are drawn against the State Treasury, and thereforeare unavailable for investment.

The objective of the investment policy is to minimize credit and marketrisks while maintaining a competitive yield on the investment portfolio.Accordingly, deposits were either insured by federal depository insuranceor collateralized. Interest earnings for the year totaled $320,910.

RISK MANAGEMENT

The Board carries various forms of insurance, including, but not limitedto, general liability, automobile liability and comprehensive/collision,hazard and theft insurance on property and contents, and blanketfinance and forgery bonds. The Board participates in the North CarolinaSchool Boards Trust (NCSBT) for general and professional liabilityinsurance and automobile insurance. NCSBT was established in 1982 bythe North Carolina School Boards Association as an independent entityfor the purpose of providing insurance protection needed by memberschool districts and school employees. For hazard and theft insurance,the Board participates in the Public School Insurance Fund, a voluntary,self-funded risk financing fund administered by the North CarolinaDepartment of Public Instruction.

The Board also participates in the Teachers and State EmployeesComprehensive Major Medical Plan to provide health benefits topermanent, full-time employees. The Plan is a self-funded risk financingpool of the State administered by Blue Cross and Blue Shield of NorthCarolina.

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INDEPENDENT AUDIT

The financial statements have been audited by Dixon Hughes PLLC,independent certified public accountants, whose opinion is included inthe Financial Section of this report. The goal of the independent auditwas to provide reasonable assurance that the financial statements ofAsheville City Schools for the fiscal year ended June 30, 2007, are freeof material misstatement. The independent auditor concluded, basedupon the audit, that there was a reasonable basis for rendering anunqualified opinion that the Asheville City Schools financial statementsfor the fiscal year ended June 30, 2007, are fairly presented inconformity with accounting principles generally accepted in the UnitedStates of America.

The independent audit of the financial statements of the Asheville CitySchools was part of a broader, federally mandated "Single Audit"designed to meet the special needs of federal grantor agencies. Thestandards governing Single Audit engagements require the independentauditor to report not only on the fair presentation of the financialstatements, but also on the audited entity's internal controls and legalrequirements involving the administration of federal awards. Thesereports are available in the Asheville City Schools separately issuedSingle Audit Report.

FINANCIAL REPORTING AWARDS

Each year since 1985, the Asheville City Schools Comprehensive AnnualFinancial Report has earned the Association of School Business OfficialsInternational (ASBO) Certificate of Excellence in Financial ReportingAward. The Report has also earned the Government Finance OfficersAssociation (GFOA) Certificate of Achievement for Excellence inFinancial Reporting for the past twenty years. These awards are made togovernmental units that publish a comprehensive annual financial reportthat is easily readable, efficiently organized, and conforms to programstandards as well as satisfies accounting principles generally accepted inthe United States of America and applicable legal requirements. Theawards are valid for a period of one year only. We believe theaccompanying Report continues to conform to ASBO and GFOA

requirements, and we will submit it to the respective organizations forconsideration of awards for the 2006-2007 fiscal year.

ACKNOWLEDGMENTS

The preparation of this report could not have been accomplished withoutthe efficient and dedicated services of the personnel in the FinanceDepartment, Superintendent's Office, Community Relations and the staffof our independent auditor. Assistance received from the personnel inBuncombe County's Finance Department, Buncombe County's TaxDepartment and the Asheville Area Chamber of Commerce was alsoinvaluable. We would like to express our appreciation to all of thesepeople for their assistance and contributions in developing the finalreport.

-------..-Allen H. JohnsonInterim Superinten nt

~7-.~

Respectfully submitted,

CkLcfJ-

Timothy F. Amos, CPAAssistant Superintendent for Business/Support Services

Donna W. Watson, CPADirector of Financial Services

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Certificate of Excellence ... Association of School Business Officials International

This Certificate of Excellence in Financial Reporting is presented to

ASHEVILLE CITY SCHOOLS

For its Comprehensive Annual Financial Report (CAFR)For the Fiscal Year Ended June 30, 2006

Upon recommendation of the Association's Panel of Review which has judged that the Reportsubstantially conforms to principles and standards of ASSO's Certificate of Excellence Program

President

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Executive Director

Certificate of Achievement ... Government Finance Officers Association

Certificate ofAchievementfor Excellence

in FinancialReporting

Presented to

Asheville City SchoolsNorth Carolina

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

June 30, 2006

A Certificate ofAchievement for Excellence in FinancialReporting is presented by the Government Finance Officers

Association of the United States and Canada togovcrnmcnt units and public employee retirementsystems whose comprehensive annual fmancial

reports (CAFRs) achieve the higheststandards in government accounting

and financial reporting.

President

Executive Director

vii

Organizational Chart

The Asheville City Board of EducationGene Bell, Chairman

AI Whitesides, Vice ChairmanPrecious Folston

Jacquelyn HallumAllison Jordan

I

Interim SuperintendentAllen H. Johnson

Associate SuperintendentCurriculum & InstructionMichael Lodico (Interim)

Jul 2007

I

~ Executive DirectorElementary Education

~ Executive DirectorSecondary Education

- Director ofExceptional Children

- Director of InstructionalAccountability & Media

- Directors of Career &Technical/StudentServices/Safe Schools

~ Director of InstructionalTechnology

_ Other Curriculum &Instruction Personnel

Executive DirectorCommunications &

Community Relations

IAssistant SuperintendentBusiness & Support Services

Timothy F. Amos

- Director of Financial Services

- Director of Maintenance

- Director of Child Nutrition

- Director of Payroll

- MIS Administrator

~Coordinator of Transportation

--Other Business & SupportServices Personnel

viii

AdministrativeAssistant

IAssistant Superintendent

Human ResourcesRobert J. McGrattan

I- Personnel Specialist

-- Other Human ResourcesPersonnel

ISchool Administrators

PreschoollEle"!enfarylSecondaryAsheville High School

'Carol Ray

Asheville Middle SchoolPam Cocke

Randolph Learning CenterGordon Grant

Claxton Elementary SchoolBarbara Lewis (Interim)

Dickson Elementary SchoolAlida Woods

Hall Fletcher Elementary SchoolPatricia Griffin (Interim)

Jones Elementary SchoolMarsha Lipe

Vance Elementary SchoolCynthia Sellinger

Asheville PreschoolDebra Preneta, Director

Other School~Based Personnel

FInAncIAL SectIon

Asheville City Schools Board Members pictured from left to right: Gene Bell, Allison Jordan, Jacquelyn Hallum,

Precious Folston and Al Whitesides

Dr. Pam CockePrincipal,

Asheville Middle School2006-07

Asheville City Schools Principal of the Year

2006-07 North Carolina Western Region

Principal of the Year

Jerome HughesTeacher,

Asheville High School2006-07

Asheville City Schools Teacher of the Year

2006-07 North Carolina Western Region

Teacher of the Year

FInAncIAL SectIon

.,.../~~iil

DIXON HUGHESpu.cCeltified Fublt Acc:ounlara and Adv8lrs

INDEPENDENT AUDITORS' REPORT

The Asheville City Board of EducationAsheville City SchoolsAsheville, North Carolina

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregateremaining fund information of the Asheville City Schools, as of and for the year ended June 30,2007, which collectively comprise Asheville City Schools' basicfinancial statements as listed in the table of contents. These financial statements are the responsibility of the Asheville City Schools' management. Ourresponsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial auditscontained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the Asheville City Schools as of June 30,2007, and the respective changes infinancial position and its cash flows, where applicable, thereof and the respective budgetary comparison for the general and the State Public School funds for theyear then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2007, on our consideration of the Asheville City Schools'internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and othermatters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing,and not to provide an opinion on the internal control over financial reporting or on compliance. Accordingly, we express no opinion. That report is an integral partof an audit performed in accordance with .Government Auditing Standards and should be considered in assessing the results of our audit.

1 500 Ridgefield Court, PO Box 3049

Asheville, NC 28802-3049

Ph. 828.254.2254 Fx. 828.254.6859

www.dixon-hughes.com

Praxiix*:IIEIIBER*O

GLOBAL ALLIANCE OFI_OEPENOENT FIRIIS

Independent Auditors' ReportPage Two

Management's Discussion and Analysis is not a required part of the basic financial statements but is supplementary information required by accounting principlesgenerally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regardingthe methods of measurement and presentation of the required supplementary information. However, we did not audit this information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements of the AshevilleCity Schools. The introductory section, combining and individual non-major fund financial statements and schedules and statistical tables are presented forpurposes of additional analysis and are not a required part of the basic financial statements. The combining and individual non-major fund financial statementsand schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in allmaterial respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to theauditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

November 15, 2007

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MANAGEMENT'S DISCUSSION AND ANALYSIS

The discussion and analysis of Asheville City Schools' (Board) financial performance provides a narrative overview of the Board's financialactivities for the fiscal year ended June 30, 2007. This information should be read in conjunction with the audited financial statementsincluded in this report.

Financial Highlights

• The assets of the Board exceeded its liabilities at the close of the fiscal year by $47,355,265.• The Board's total net assets increased by $104,913.• Renovations to the historic 1922 Claxton Elementary School facility were completed for the start of the 2006-07 school year. The

$9.2 million dollar project took several years to complete and included renovations to the existing facility and construction of a newcafeteria.

• During fiscal year 2005, construction began on a new cafeteria building at Asheville High School. Construction of the cafeteriabuilding was completed for the start of the 2006-07 school year at a total cost of $3.2 million.

Overview of the Financial Statements

The audited financial statements of Asheville City Schools consist of four components. They are as follows:• Independent Auditors' Report• Management's Discussion and Analysis (required supplementary information)• Basic Financial Statements• Required supplemental section that presents combining and budgetary statements for governmental and enterprise funds

The Basic Financial Statements include two types of statements that present different views of the Board's finances. The first is thegovernment-wide statements. The government-wide statements are presented on the full accrual basis of accounting and include theStatement of Net Assets and the Statement of Activities. The Statement of Net Assets includes all of the Board's assets and liabilities.Assets and liabilities are classified in the order of relative liquidity for assets and due date for liabilities. This statement provides asummary of the Board's investment in assets and obligations to creditors. Liquidity and financial flexibility can be evaluated using theinformation contained in this statement. The Statement of Activities summarizes the Board's revenues and expenses for the current year.A net (expense) revenue format is used to indicate to what extent each function is self-sufficient.

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ASHEVILLE CITY SCHOOLS Management's Discussion and Analysis, Continued

The second set of statements included in the basic financial statements is the Fund Financial Statements, which are presented for theBoard's governmental funds and proprietary fund. These statements present the governmental funds on the modified accrual basis ofaccounting, measuring the near term inflows and outflows of financial resources and what is available at year-end to spend in the nextfiscal year. The proprietary fund is presented on the full accrual basis of accounting. The fund financial statements focus on the Board'smost significant funds. Because a different basis of accounting is used in the government-wide statements, reconciliation from thegovernmental fund financial statements to the government-wide statements is required. The government-wide statements provideinformation about the Board as an economic unit while the fund financial statements provide information on the financial resources ofeach of the Board's major funds.

Government-wide Statements

The government-wide statements report information about the unit as a whole using accounting methods similar to those used by privatesector companies. The Statement of Net Assets includes all of the Board's assets and liabilities. All of the current year's revenues andexpenses are accounted for in the statement of activities regardless of when cash is received or paid.

The two government-wide statements report the Board's net assets and how they have changed. Net assets - the difference betweenthe Board's assets and liabilities - is one way to measure the unit's financial health or position.

• Over time, increases or decreases in the Board's net assets are an indicator of whether its financial position is improving ordeteriorating.

• To assess the Board's overall health, one needs to consider additional non-financial factors such as changes in the County's propertytax base and the condition of the Board's school buildings and other physical assets.

The unit's activities are divided into two categories in the government-wide statements:

• Governmental activities: Most of the Board's basic services are included here, such as regular and special education, transportation,and administration. County funding, the Asheville City Schools supplemental city school tax, and state and federal aid finance most ofthese activities.

• Business-type activities: The Board charges fees to help cover the costs of certain services it provides. Child nutrition is included here.

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Fund Financial Statements

Management's Discussion and Analysis, Continued

The fund financial statements provide more detailed information about the Board's funds, focusing on its most significant or "major" funds- not the unit as a whole. Funds are accounting devices the Board uses to keep track of specific sources of funding and spending onparticular programs.

• Some funds are required by State law, such as the State Public School Fund.• The Board has established other funds to control and manage money for a particular purpose or to show that it is properly using

certain revenues, such as in the Federal Grants fund.

Asheville City Schools has three types of funds:

Governmental funds: Most of the Board's basic services are included in the governmental funds, which generally focus on two things how cash and other assets can readily be converted to cash flow in and out, and the balances left at year-end that are available forspending. As a result of this focus, the governmental funds statements provide a detailed short-term view that helps the reader determinewhether there are more or fewer financial resources that can be spent in the coming year to finance the Board's programs. Because thisinformation does not encompass the additional long-term focus of the government-wide statements, additional information at the bottomof the governmental funds statements, in the form of reconciliation, explains the relationship (or differences) between the governmentwide and the fund financial statements. The Board has several governmental funds: the General Fund, the State Public School Fund, theIndividual Schools Fund, the Capital Outlay Fund, and the Federal Grants Fund.

Proprietary fund: Services for which the Board charges a fee are generally reported in the proprietary fund. The proprietary fundstatement is reported on the same full accrual basis of accounting as the government-wide statements. Asheville City Schools has oneproprietary fund, an enterprise fund, the Child Nutrition Fund.

Fiduciary fund: Assets held by the Board as an agent for other organizations are accounted for using an Agency fund. Since theresources of the Agency fund are not available to support government programs, they are excluded from the government-widestatements.

Financial Analysis of the Schools as a Whole

Net assets are an indicator of the fiscal health of the Board. Assets exceeded liabilities by $47,355,265 as of June 30, 2007, compared to$47,250,352 as of June 30, 2006. Capital assets represented the largest component of net assets. Capital assets totaled $42,885,243 atJune 30, 2007, a decrease of $351,903 compared to June 30, 2006. As noted earlier, two large multi-year construction projects, the newcafeteria building at Asheville High School and the addition and renovation project at Claxton Elementary School, were completed at the start

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of the 2006-07 school year. Consequently, the costs of these two projects were transferred from construction in progress to buildings andthe Board began to depreciate the completed projects. The end result was that depreciation expense reported in the governmental activitiesexceeded asset additions for fiscal year 2007. However, completion of these same construction projects during fiscal year 2007 also led to asignificant reduction in current liabilities reported in the governmental activities at year end since there were no construction contractspayable at June 30, 2007. In the business-type activities, the current year loss (before transfers in) created a negative balance in unrestrictednet assets, causing an internal balance owed to the governmental activities in excess of current assets, thereby creating the negative currentassets in business-type activities. However, the increase in capital assets of the business-type activities, accompanied by the reduction incurrent liabilities of the governmental activities, led to a small increase in the overall net assets of the Board.

Following is a summary of the Statement of Net Assets:

2007 2006Total Total

Governmental Business-type Government- Governmental Business-type Government-Activities Activities wide Activities Activities wide

Current assets $ 7,967,713 $ (80,485) $ 7,887,228 $ 7,968,562 $ 61,370 $ 8,029,932Capital assets 42,579,373 305,870 42,885,243 43,180,650 56,496 43,237,146

Total assets 50,547,086 225,385 50,772,471 51,149,212 117,866 51,267,078

Current liabilities 1,730,369 19,639 1,750,008 2,360,385 16,681 2,377,066Long-term liabilities 1,648,400 18,798 1,667,198 1,615,246 24,414 1,639,660

Total liabilities 3,378,769 38,437 3,417,206 3,975,631 41,095 4,016,726

Invested in capital assets 42,579,373 305,870 42,885,243 43,180,650 56,496 43,237,146Restricted net assets 262,136 - 262,136 302,351 - 302,351Unrestricted net assets 4,326,808 (118,922) 4,207,886 3,690,580 20,275 3,710,855

Total net assets $47,168,317 $ 186,948 $47,355,265 $47,173,581 $ 76,771 $47,250,352

Table 1Condensed Statement of Net Assets

June 30, 2007 and 2006

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The following table shows the revenues and expenses for the Board for the current fiscal year.

Table 2Condensed Statement of Activities

For the Years Ended June 30, 2007 and 2006



Revenues:Program revenues:

Charges for services $ 1,443,047 $ 507,126 $ 1,950,173 $ 1,395,058 $ 446,497 $ 1,841,555Operating grants and

contributions 25,468,050 965,387 26,433,437 24,621,723 929,235 25,550,958Capital grants and

contributions 5,588 - 5,588 23,345 - 23,345General revenues:

State of North Carolina - - - 452,372 - 452,372Buncombe County 8,395,933 - 8,395,933 13,592,503 - 13,592,503Supplemental city

school tax 7,402,672 - 7,402,672 6,677,152 - 6,677,152Local option sales tax 3,125,067 - 3,125,067 2,848,259 - 2,848,259Other revenues 1,171,268 1,819 1,173,087 791,591 16,414 808,005

Total revenues 47,011,625 1,474,332 48,485,957 50,402,003 1,392,146 51,794,149

Expenses:Governmental activities:

Instructional programs 32,144,863 - 32,144,863 30,113,067 - 30,113,067Support services 11,579,037 - 11,579,037 11,217,031 - 11,217,031Community services 200,547 - 200,547 200,399 - 200,399Non-programmed charges 424,340 - 424,340 403,197 - 403,197Unallocated depreciation

expense 2,313,179 - 2,313,179 1,908,699 - 1,908,699Business-type activities:

Child Nutrition - 1,719,078 1,719,078 - 1,621,843 1,621,843Total expenses 46,661,966 1,719,078 48,381,044 43,842,393 1,621,843 45,464,236

Revenues over (under)expenses 349,659 (244,746) 104,913 6,559,610 (229,697) 6,329,913

Transfers in (out) (354,923) 354,923 - (60,682) 60,682 -Change in net assets (5,264) 110,177 104,913 6,498,928 (169,015) 6,329,913Net assets--beginning 47,173,581 76,771 47,250,352 40,674,653 245,786 40,920,439

Net assets--ending $ 47,168,317 $ 186,948 $ 47,355,265 $ 47,173,581 $ 76,771 $ 47,250,352

7


Governmental activities generated revenues of $47.0 million for fiscal year 2007 compared to $50.4 million for the previous year. Thecompletion of two major construction projects at the beginning of fiscal year 2007 led to a $5.6 million decrease in restricted Countyappropriations for construction projects. This decrease was partially offset by increases in grant funding, the County generalappropriation, the Asheville City Schools supplemental city school tax and local option sales tax. Governmental activities expenses totaled$46.7 million for fiscal year 2007 compared to $43.8 million for the previous year. The increase in expenses for governmental activitieswas largely due to salary increases for certified and classified employees, increased benefits costs, additional grant funding and increaseddepreciation expense related to major building improvement projects.

The Asheville City Schools supplemental city school tax comprised 16% and 13%, respectively, of total governmental revenues for fiscalyears 2007 and 2006. County funding decreased from 27% in 2006 to 18% in 2007 due to the reduction in restricted County fundingnecessary for construction projects. Much of the remaining governmental revenues consist of restricted State and federal money.Instructional expenses comprised 69% of total governmental expenses for both fiscal years 2007 and 2006. Support services accountedfor 25% of expenses in fiscal year 2007 compared to 26% for fiscal year 2006.

Business-type activities generated revenue of $1.5 million in fiscal year 2007 and $1.4 million in fiscal year 2006, and had expenses of$1.7 million in 2007 and $1.6 million in 2006. The overall increase in revenue in 2007 was due to a combination of factors like theincrease in the federal free and reduced price meal reimbursement rates, increased participation in the state kindergarten breakfastprogram and increased supplemental sales. Increases in expenses kept pace with the increased revenues in fiscal year 2007 due toincreases in salaries and benefits, the higher cost of serving healthier foods and increased depreciation expense of new equipment in twonew cafeterias. However, because of the transfer of the cost of the new cafeteria equipment from the governmental activities to thebusiness-type' activities, the business"type activities ended the year with a $110,177 increase in net assets.

Financial Analysis of the Board's Funds

Governmental Funds: The focus of Asheville City Schools' governmental funds is to provide information on near-term inflows, outflows,and balances of usable resources. Such information is useful in assessing the Board's financing requirements. Specifically, unreservedfund balance can be a useful measure of a government's net resources available for spending at the end of the fiscal year. Table 3 on thefollowing page compares fund balance at June 30, 2007 and 2006 for the General Fund, the Capital Outlay Fund and the Non-MajorGovernmental Funds. The State Public School Fund does not maintain a fund balance since revenues must equal expenditures. Thus it hasbeen excluded from Table 3.

At June 30, 2007, the governmental funds of Asheville City Schools reported a combined fund balance of $6,443,072, a $627,914increase over last year. All of the increase occurred within the Capital Outlay Fund. Part of this increase resulted from an activity busbudgeted for and ordered during fiscal year 2007, but not completed and delivered until after June 30, 2007. Funds budgeted but notused for a new maintenance facility also contributed to the fund balance increase in the Capital Outlay Fund. The City of Asheville has

8


agreed to let the Asheville City Schools Maintenance Department continue to use space within one of its buildings for the foreseeablefuture.

Table 3Summary of Fund Balances-Governmental Funds

June 30, 2007 and 2006

2007 2006Other Other

Capital Outlay Govemmental Capital Outlay GovernmentalGeneral Fund Fund Funds Total General Fund Fund Funds Total

Reserved $ 630,740 $ 182,615 $ - $ 813,355 $ 599,109 $ 635,076 $ ~ $1,234,185Unreserved 4,162,286 1,205,295 262,136 5,629,717 4,269,660 8,962 302,351 4,580,973

Total $4,793,026 $1,387,910 $ 262,136 $6,443,072 $4,868,769 $ 644,038 $ 302,351 $5,815,158

Proprietary Fund: The Board's proprietary fund reflected a net increase of $110,177 for 2007 compared to a net loss of $169,015 for2006. The $296,656 transfer from the Capital Outlay Fund for the cost of new cafeteria equipment installed in the new cafeterias atAsheville High School and Claxton Elementary School accounted for the net increase.

General Fund Budgetary Highlights

Over the course of the year, the Board revised the budget several times to account for changes in revenue expectations and to increase ordecrease appropriations in light of revised revenue estimates. As of June 30, 2007, net increases in estimated revenues andappropriations totaled $78,820 in the General Fund. Grants awarded by external sources after the original budget ordinance was adoptedaccounted for most of the budget increases approved for the General Fund.

State funds allocated but not used during fiscal year 2007 for the initial purchase or replacement of textbooks available from the statetextbook warehouse contributed $288,291 to the negative budget variance when comparing the final amended budget for State of NorthCarolina revenues in the General Fund to actual revenues. Conversely, these same funds were included in the instructional programsregular expenditure budget and, thus, contributed the same amount as a positive variance in that line item. The State of North Carolinatextbook warehouse allotment carries forward indefinitely for Asheville City Schools to use to order textbooks from the state textbookwarehouse in future fiscal years.

9

ASHEVillE CITY SCHOOLS Management's Discussion and Analysis, Continued

Similarly, $172,910 of federal Early Head Start grant funds budgeted as U.S. Government revenues and instructional programs specialexpenditures but not received/spent until fiscal year 2008 resulted in a negative revenues budget variance and a positive expendituresbudget variance. This situation occurs each year because the funding cycle for the Early Head Start grant does not coincide with AshevilleCity Schools' fiscal year July 1 to June 30, but instead runs from September 1 to August 31.

Higher than expected growth in both the Asheville City Schools supplemental city school tax and sales tax revenues led to significantpositive budgetary variances when comparing budgeted local revenues to actual receipts. The positive revenue variance for the AshevilleCity Schools supplemental city school tax was $242,863 and the positive revenue variance for sales tax revenues was $365,888.

Capital Assets

As noted and explained on Page 5 of Management's Discussion and Analysis, capital assets decreased $351,903 over the previous year.Following is a summary of capital assets, net of depreciation at year-end. Additional information regarding the Board's capital assets can befound in the notes to the basic financial statements on Pages 29 and 32 of this report.



Land $ 1,307,576 $ - $ 1,307,576 $ 1,307,576 $ - $ 1,307,576Land improvements 1,798,122 - 1,798,122 1,198,704 - 1,198,704Buildings 37,698,656 - 37,698,656 26,889,548 - 26,889,548Construction in progress 70,929 - 70,929 12,212,538 - 12,212,538Equipment and furniture 1,398,140 305,870 1,704,010 1,216,755 56,496 1,273,251Vehicles 305,950 - 305,950 355,529 - 355,529

Total $42,579,373 $ 305,870 $42,885,243 $43,180,650 $ 56,496 $43,237,146

Table 4Summary of Capital Assets

June 30,2007 and 2006

10


Debt Outstanding

Management's Discussion and Analysis, Continued

The Board is limited by North Carolina General Statutes with regards to the types of debt it can issue and for what purpose that debt can beused. The County holds all debt issued for school capital construction. The Board has not entered into any other financing arrangements as ofJune 30, 2007. The long-term obligations shown on the Statement of Net Assets represent the long-term liability for compensated absencesto be paid from governmental and proprietary funds. Additional information regarding the Board's debt can be found in the notes to the basicfinancial statements on Pages 29 and 36 of the report.

Economic Factors

The Board anticipates stable enrollment over the next several years and will need continued increases in funding to accomplish the goalsoutlined in the Board's five-year strategic plan. County funding and the Asheville City Schools supplemental city school tax are majorsources of income for the Board; therefore the County's economic outlook directly affects that of the schools. The following factorsshould positively affect the economic outlook of Buncombe County.

• The County is experiencing positive employment growth rates with 2,700 net new jobs added over the past year.• The County's unemployment rate is lower than both the state and the national rate.• The housing market is stable with appreciation rates well exceeding the national rate.• Stable population growth patterns are projected.

Requests for Information

This report is intended to provide a summary of the financial condition of Asheville City Schools. Questions or requests for additionalinformation should be addressed to:

Donna Watson, CPADirector of Financial Services

Asheville City SchoolsPost Office Box 7347Asheville, NC 28802

11


STATEMENT OF NET ASSETS

June 30, 2007

Governmental Business-TypeActivities Activities Total

Assets:Cash and cash equivalents $ 6,383,449 $ 100 $ 6,383,549Internal balances 118,209 (118,209)Due from other governments 1,391,667 9,459 1,401,126Accounts receivable (net) 17,067 1,533 18,600Inventories 26,632 26,632Prepaid expense 57,321 57,321Capital assets:

Land and construction in progress 1,378,505 1,378,505Other capital assets, net of depreciation 41,200,868 305,870 41,506,738

Total capital assets 42,579,373 305,870 42,885,243

Total assets 50,547,086 225,385 50,772,471

Liabilities:Accounts payable 205,268 3,864 209,132Accrued salaries and wages payable 1,188,443 3,245 1,191,688Unearned revenue 130,930 7,936 138,866Long-term liabilities:

Due in one year 205,728 4,594 210,322Due in more than one year 1,648,400 18,798 1,667,198

Total liabilities 3,378,769 38,437 3,417,206

Net assets:Invested in capital assets 42,579,373 305,870 42,885,243Restricted for:

Individual schools 262,136 262,136Unrestricted 4,326,808 (118,922) 4,207,886

Total net assets $ 47,168,317 $ 186,948 $ 47,355,265

The notes to the basic financial statements are an integral part of this statement.

12


STATEMENT OF ACTIVITIES

For the Year Ended June 30, 2007

Net (Expense) Revenue andProgram Revenues Changes in Net Assets

Operating Capital GrantsCharges for Grants and and Governmental Business..type

Functions/Programs Expenses Services Contributions Contributions Activities Activities Total

Governmental activities:Instructional programs:

Regular $ 19,967,209 $ 119,586 $ 13,571,486 $ $ (6,276,137) $ $ (6,276,137)Special 7,390,520 543,792 5,461,644 (1,385,084) (1,385,084)Co-curricular 1,211,285 773,041 109,131 (329,113) (329,113)Student service 3,056,522 2,287,848 (768,674) (768,674)Other 519,327 283,735 (235,592) (235,592)

Support services:Pupil 42,651 29,120 (13,531) (13,531)Instructional staff 659,885 203,047 (456,838) (456,838)Administrative 1,261,169 709,225 (551,944) (551,944)School administration 2,853,995 1,653,247 (1,200,748) (1,200,748)Business 5,769,500 802,411 5,588 (4,961,501 ) (4,961,501 )Central 968,005 55,974 (912,031 ) (912,031 )Other 23,832 (23,832) (23,832)

Community services 200,547 6,628 3,818 (190,101) (190,101)Non-programmed charges 424,340 297,364 (126,976) (126,976)Unallocated depreciation

expense** 2,313,179 (2,313,179) (2,313,179)Total governmental activities 46,661,966 1,443,047 25,468,050 5,588 (19,745,281) (19,745,281)

(continued)

13

Program RevenuesNet (Expense) Revenue and

Changes in Net Assets

Functions/Programs ExpensesCharges for

Services

Operating Capital GrantsGrants and and

Contributions ContributionsGovernmental

ActivitiesBusiness-type

Activities

Business-type activities:Child Nutrition $ 1,719,078 $ 507,126 $ 965,387 $ $ $ (246,565) $ (246,565)

Total government-wide $ 48,381,044 $ 1,950,173 $ 26,433,437 $ 5,588 (19,745,281) (246,565) (19,991,846)

General revenues:Restricted:

Buncombe CountyUnrestricted:

U.S. GovernmentBuncombe CountySupplemental city school taxLocal option sales taxInterest earned on investmentsOther revenues

Transfers

Total general revenues and transfers

Change in net assets

Net assets--beginning

Net assets--ending

* * This amount excludes the depreciation that is included in the direct expenses of the various programs.


14

1,561,433 1,561,433

198,993 198,9936,834,500 6,834,5007,402,672 7,402,6723,125,067 3,125,067

319,091 1,819 320,910653,184 653,184

(354,923) 354,92319,740,017 356,742 20,096,759

(5,264) 110,177 104,913

47,173,581 76J71 47,250,352

$ 47,168,317 $ 186,948 $ 47,355,265


BALANCE SHEET--GOVERNMENTAL FUNDS

June 30, 2007

Major FundsOther Total

State Public Capital Governmental GovernmentalGeneral School Outlay Funds Funds

Assets

Cash and cash equivalents $ 4,761,802 $ $ 1,359,511 $ 262,136 $ 6,383,449Due from other funds 118,209 118,209Due from other governments 426,995 838,320 42,024 84,328 1,391,667Accounts receivable (net) 17,067 17,067Prepaids 57,321 57,321

Total assets $ 5,381,394 $ 838,320 $ 1,401,535 $ 346,464 $ 7,967,713

Liabilities and· Fund Balances

Liabilities:Accounts payable $ 188,242 $ $ 13,625 $ 3,401 $ 205,268Accrued salaries and wages payable 275,173 837,182 76,088 1,188,443Unearned revenue 124,953 1,138 4,839 130,930

Total liabilities 588,368 838,320 13,625 84,328 1,524,641

(continued)

15

Major FundsOther Total

State Public Capital Governmental GovernmentalGeneral School Outlay Funds Funds

Fund balances:Reserved for:

Prepaids $ 57,321 $ $ $ $ 57,321Encumbrances 11,148 140,591 151,739State statute 562,271 42,024 604,295

Unreserved, reported in:General Fund 2,144,286 2,144,286Special Revenue Funds 262,136 262,136Capital Outlay Fund 205,295 205,295

Unreserved, designated for:Subsequent year's budget 2,018,000 1,000,000 3,018,000

Total fund balances 4,793,026 1,387,910 262,136 6,443,072

Total liabilities and fund balances $ 5,381,394 $ 838,320 $ 1,401,535 $ 346,464

Amounts reported for governmental activities in the statement of netassets are different because:Capital assets used in governmental activities are not financial resources

and therefore are not reported in the funds. 42,579,373Compensated absences are not due and payable with current financial

resources and therefore are not reported in the funds. (1,854,128)

Net assets of governmental activities $ 47,168,317


16


STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES--GOVERNMENTAL FUNDS


17

(continued)

Amounts reported for governmental activities in the Statement of Activities are different because:Net changes in fund balances--total governmental funds

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assetsis allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlayexceeded depreciation in the current period:Depreciation expenseCapital outlays

Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore,are not reported as expenditures in the governmental funds:Net change in compensated absences

Total changes in net assets of governmental activities

The notes to the basic financial statements are an integral part· of this statement.

18

$

$

627,914

(2,340,219)1,738,942

(31,901)

(5,264)


STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES--BUDGET AND ACTUAL

GENERAL FUND AND ANNUALLY BUDGETED MAJOR SPECIAL REVENUE FUND


General Fund State Public School Fund

Positive Positive

Original Final (Negative) Original Final (Negative)

BUdget Budget Actual Variance Budget Budget Actual Variance

Revenues:State of North Carolina $ 806,502 $ 806,502 $ 508,656 $ (297,846) $20,633,564 $21, 106,488 $20,479,003 $ (627,485)

U.S. Government 1,461,639 1,510J90 1,233,233 (277,557)Local 17,083,051 17,101,720 17,854,054 752,334

Total revenues 19,351,192 19,419,012 19,595,943 176,931 20,633,564 21,106,488 20,479,003 (627,485)

Expenditures:Current:

Instructional programs:Regular 4,145,424 4,181,752 3,671,124 510,628 10,224,461 10,458,262 10,352,011 106,251Special 2,007,940 2,014,106 1,718,456 295,650 1,763,797 1,860,711 1,820,526 40,185Student services 577,012 577,012 545,015 31,997 1J39,317 1,768,190 1J42,126 26,064Other 4,782,138 4,780,699 4,657,637 123,062 3,813,983 3,862,268 3,527,910 334,358

Support services:Pupil 61 61 55 6Instructional staff 418,250 418,250 403,993 14,257 123,926 123,503 123,491 12Administrative 830,205 830,205 667,621 162,584 375,000 386,176 386,174 2School administration 1,196,740 1, 196,740 1,091,975 104,765 1,366,748 1,373,060 1,344,268 28,792Business 4,433,083 4,467,365 4,157,644 309,721 492,523 535,722 529,577 6,145Central 978,467 978,467 733,811 244,656 5,500 5,333 167Other 1,353,781 1,357,264 1,275,791 81,473 675,455 674,742 589,320 85,422

Community services 211,885 211,885 204,424 7,461Non-programmed charges:

Payments to charter schools 464,075 464,075 407,210 56,865Other 61,131 61,131 11,129 50,002

Total expenditures 21,460,192 21,539,012 19,545,885 1,993,127 20,575,210 21,048,134 20,420,736 627,398

Revenues over (under) expenditures (2,109,000) (2,120,000) 50,058 2,170,058 58,354 58,354 58,267 (87)

(continued)

19

General Fund State Public School Fund

Positive Positive

Original Final (Negative) Original Final (Negative)

Budget Budget Actual Variance Budget Budget Actual Variance

Other financing sources (uses):Transfers from other funds $ 60,000 $ 60,000 $ 74,199 $ 14,199 $ $ $ $

Transfers to other funds (200,000) (200,000) (200,000) (58,354) (58,354) (58,267) 87Appropriated fund balance 2,249,000 2,260,000 (2,260,000)

Total other financingsources (uses) 2,109,000 2,120,000 (125,801 ) (2,245,801 ) (58,354) (58,354) (58,267) 87

Net change in fund balances $ $ (75,743) $ (75,743) $ $ $

Fund balances--beginning of year 4,868,769

Fund balances--end of year $ 4,793,026 $


20


STATEMENT OF NET ASSETS--PROPRIETARY FUND

June 30, 2007

Assets

Child NutritionFund

Current assets:Cash and cash equivalentsDue from other governmentsAccounts receivable (net)Inventories

Total current assets

Non-current assets:Capital assets:

Furniture and equipment, net

Total assets

Liabilities

Current liabilities:Accounts payableDue to other fundsAccrued salaries and wages payableUnearned revenueCompensated absences, current portion

Total current liabilities

Non-current liabilities:Compensated absences, less current portion

Total liabilities

Net Assets

Invested in capital assetsUnrestricted

Total net assets


21

$

$

1009,4591,533

26,63237,724

305,870

343,594

3,864118,209

3,2457,9364,594

137,848

18,798

156,646

305,870(118,922)

186,948


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSnpROPRIETARY FUND


Child NutritionFund

Operating revenues:Food sales

Operating expenses:Food costSalaries and benefitsMaterials and suppliesDepreciationOther

Total operating expenses

Operating loss

Non-operating revenues (expense):Federal reimbursementsFederal commoditiesState reimbursementsInterest earnedLoss on disposal of assets

Total non-operating revenues (expense)

Loss before transfersTransfers from other fundsChange in net assets

Total net assets--beginning

Total net assets--ending


22

$

$

507,126

736,759859,267

65,43334,22819,697

1,715,384

(1,208,258)

795,12464,782

105,4811,819

(3,694)963,512

(244,746)354,923110,177

76,771

186,948


STATEMENT OF CASH FLOWS--PROPRIETARY FUND


Cash flows from operating activities:Cash received from customersCash paid for goods and servicesCash paid to employees for services

Net cash used for operating activities

Cash flows from non-capital financing activities:State reimbursementsFederal reimbursements

Net cash provided by non-capital financing activities

Cash flows from investing activities:Interest on investmentsProceeds from sale of assets

Net cash provided by investing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

23

Child NutritionFund

$ 504,081(624,182)(806,090)(926, 191)

105,481795,124900,605

1,8199,360

11,179

(14,407)

14,507

$ 100

(continued)

Reconciliation of operating loss to net cash used for operating activities:Operating loss

Adjustments to reconcile operating loss to net cash used for operating activities:DepreciationDonated commodities consumedSalaries paid by special revenue fundChange in assets and liabilities:

Increase in due from other governments and accounts receivable (net)Decrease in inventories of food and supplies, netIncrease in accounts payable and accrued salaries and wages payableIncrease in due to other fundsDecrease in compensated absencesDecrease in unearned revenue

Net cash used for operating activities

Child NutritionFund

$ (1,208,258)

34,22864,78258,267

(3,036)12,276

1,408118,209

(4,058)(9)

$ (926,191 )

Non-cash investing, capital, and financing activities:Donated commodities received

Transfer of assets from the capital outlay fund

Transfer for salaries paid by special revenue fund


24

$

$

$

64,782

296,656

58,267


STATEMENT OF FIDUCIARY ASSETS AND LlABILITIES--FIDUCIARY FUND

June 30, 2007

Assets:Cash and cash equivalents

Liabilities:Due to other sources


25

Agency

Fund

$ 1,644,164

$ 1,644,164

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of Asheville CitySchools conform to accounting principlesgenerally accepted in the United States ofAmerica as applicable to governments. Thefollowing is a summary of the moresignificant accounting policies:

Reporting Entity

Asheville City Schools (Board) is a LocalEducation Agency empowered by Statelaw [Chapter 11 5C of the North CarolinaGeneral Statutes, hereafter referred to asG.S.] with the responsibility to overseeand control all activities related to publicschool education in Asheville, NorthCarolina. The Board receives state, local,and federal government funding and mustadhere to the legal requirements of eachfunding entity.

The reporting entity is comprised of theprimary government and its componentunits. Component units are legallyseparate organizations for which theBoard is financially accountable. TheBoard is financially accountable if theBoard appoints a voting majority of theorganization's governing board and (1)the Board is able to significantly influencethe programs or services performed orprovided by the organization; or (2) theBoard is legally entitled to or canotherwise access the organizations'resources; the "Board is legally obligated

NOTES TO FINANCIAL STATEMENTS

or has assumed responsibility to financethe deficits of, or provide financialsupport to, the organization; or the Boardis obligated for the debt of theorganization. The Board is a primarygovernment because it is a special purposegovernment that is legally separate and isfiscally independent of other state or localgovernments. Furthermore, there are nocomponent units combined with the Boardfor financial statement presentationpurposes, and it is not included in anyother governmental reporting entity.

Basis of Presentation

Government-wide Statements: Thestatement of net assets and thestatement of activities display informationabout the Board. These statementsinclude the financial activities of theoverall government, except for fiduciaryactivities. Eliminations have been made tominimize the effect of internal activitiesupon revenues and expenses; however,interfund services provided and usedare not eliminated in the processof consolidation. These statementsdistinguish between the governmentaland business-type activities of the Board.Governmental activities generally arefinanced through intergovernmentalrevenues and other non-exchangetransactions. Business-type activities arefinanced in whole or in part by feescharged to external parties.

26

The statement of activities presents acomparison between direct expenses andprogram revenues for the differentbusiness-type activities of the Board andfor each function of the Board'sgovernmental activities. Direct expensesare those that are specifically associatedwith a program or function and,therefore, are clearly identifiable to aparticular function. Indirect expenseallocations that have been made in thefunds have been reversed for thestatement of activities. Program revenuesinclude (a) fees and charges paid by therecipients of goods or services offered bythe programs and (b) grants andcontributions that are restricted tomeeting the operational or capitalrequirements of a particular program.Revenues that are not classified as'program revenues are presented asgeneral revenues.

Fund Financial Statements: The fundfinancial statements provide informationabout the Board's funds, including itsfiduciary funds. Separate statements foreach fund category - governmental,proprietary, and fiduciary arepresented. The emphasis of fund financialstatements is on major governmental andenterprise funds, each displayed in aseparate column. All remaininggovernmental funds are aggregated andreported in one column as othergovernmental funds. The fiduciary fundsare presented separately.

Proprietary fund operating revenues, suchas charges for services, result fromexchange transactions associated withthe principal activity of the fund.Exchange transactions are those in whicheach party receives and gives upessentially equal values. Non-operatingrevenues, such as subsidies andinvestment earnings, result from nonexchange transactions or ancillaryactivities. Operating expenses result fromnormal day-to-day transactions associatedwith the fund. Non-operating expenses,such as loss on disposal of capital assets,result from unusual transactions notassociated with the day-to-daytransactions of the fund.

The Board reports the following majorgovernmental funds:

General Fund. The General Fund is thegeneral operating fund of the Board. TheGeneral Fund accounts for all financialresources except those that are requiredto be accounted for in another fund. Thisfund is the "Local Current Expense Fund,"which is mandated by State law [G.S.115C-426].

State Public School Fund. The StatePublic School Fund includes appropriations from the Department of PublicInstruction for the current operatingexpenditures of the public school system.


Capital Outlay Fund. The Capital OutlayFund accounts for financial resources tobe used for the acquisition andconstruction of major capital facilities andthe acquisition of vehicles and equipment(other than those financed by proprietaryfunds). It is mandated by State law[G.S.115C-426]. Major capital projectsare funded by Buncombe County andState resources.

The Board reports the following majorenterprise fund:

Child Nutrition Fund - The Child NutritionFund is used to account for the foodservice program within the schoolsystem.

The Board reports the following fiduciaryfund:

Agency Fund - The Agency Fund is usedto account for assets held by the Board asan agent for other organizations. TheAgency Fund is used to account for fundsdeposited with the Board as an agent forthe benefit of various scholarship andawards funds, the Asheville City SchoolsFoundation, the Asheville City SchoolsPool Committee, the Educational AccessChannel Consortium, and the MedicalReimbursement Plan.

27

Measurement Focus and Basis ofAccounting

Government-wide and Proprietary FundFinancial Statements. The governmentwide and proprietary fund financialstatements are reported using theeconomic resources measurement focusand the accrual basis of accounting.Revenues are recorded when earned andexpenses are recorded at the timeliabilities are incurred, regardless of whenthe related cash flows take place. Nonexchange transactions, in which theBoard gives (or receives) value withoutdirectly receiving (or giving) equal value inexchange, include grants and donations.Revenue from grants and donations isrecognized in the fiscal year in which alleligibility requirements have beensatisfied.

Governmental Fund Financial Statements.Governmental funds are reported usingthe current financial resources measurement focus and the modified accrualbasis of accounting. Under this method,revenues are recognized whenmeasurable and available. The Boardconsiders all revenues reported in thegovernmental funds to be available if therevenues are collected within sixty daysafter year-end. These could includefederal, State, and county grants, andsome charges for services. Expenditures

are recorded when the related fundliability is incurred, except for claims andjudgments and compensated absences,which are recognized as expenditures tothe extent they have matured. Generalcapital asset acquisitions are reported asexpenditures in governmental funds.

Fiduciary Fund Financial Statement - TheBoard's only fiduciary fund is its AgencyFund. An Agency Fund is custodial innature (assets equal liabilities) and doesnot involve measuring the results ofoperations, and therefore has nomeasurement focus.

Under the terms of grant agreements, theBoard funds certain programs by acombination of specific cost-reimbursement grants and generalrevenues. Thus when program expensesare incurred, there are both restricted andunrestricted net assets available tofinance the program. It is the Board'spolicy to first apply cost-reimbursementgrant resources to such programs and.then general revenues.

The Board's enterprise fund follows FASBStatements and Interpretations issued onor before November 30, 1989,Accounting Principles Board Opinions,and Accounting Research Bulletins,unless those pronouncements conflictwith GASB pronouncements.


Budgetary Data

The Board's budgets are adopted asrequired by the North Carolina GeneralStatutes. Annual budgets are adopted forall funds, except for the individualschools special revenue fund, as requiredby the North Carolina General Statutes.No budget is required by State law forindividual school funds. Allappropriations, except where construction project budgets have been approvedin the Capital Outlay Fund, lapse at thefiscal year-end. All budgets are preparedusing the modified accrual· basis ofaccounting. Expenditures may not legallyexceed appropriations at the functionallevel for all annually budgeted funds. TheBoard has authorized the Superintendentto move moneys (up to $5,000) from onefunction to another within a fund.Amendments are required for anyrevisions that alter total expenditures ofany fund or that change functionalappropriations by more than $5,000. Allamendments must be approved by thegoverning board. During the year, severalamendments to the original budgetordinance were necessary. The budgetordinance must be adopted by July 1 ofthe fiscal year or the governing boardmust adopt an interim budget that coversthat time until the annual ordinance canbe adopted.

28

Assets, Liabilities, and Net Assets/FundBalances

Deposits and Investments - All deposits ofthe Board are made in board-designatedofficial depositories and are secured asrequired by State law [G.S. 115C-444].The Board may designate, as an officialdepository, any bank or savingsassociation whose principal office islocated in North Carolina. Also, the Boardmay establish time deposit accounts suchas NOW and SuperNOW accounts,money market accounts, and certificatesof deposit. The Board also has moneycredited in its name with the StateTreasurer and may issue State warrantsagainst these funds.

State law [G.S. 115C-443l authorizes theBoard to invest in obligations of theUnited States or obligations fullyguaranteed both as to principal andinterest by the United States; obligationsof the State of North Carolina; bonds andnotes of any North Carolina localgovernment or public authority;obligations of certain non-guaranteedfederal agencies; certain high qualityissues of commercial paper and bankers'acceptances; the North Carolina CapitalManagement Trust (NCCMT), an SECregistered (2a-7) money market mutualfund; and the North Carolina StateTreasurer's Short Term Investment Fund


Capital assets are depreciated using thestraight-line method over the followingestimated useful lives:

of the property back to the Board once allrestrictions of the financing agreementshave been met.

Long-Term Obligations - In the government-wide financial statements, longterm obligations are reported as liabilitiesin the applicable governmental activities.

Compensated Absences - The Boardfollows the State's policy for vacationand sick leave. Employees mayaccumulate up to thirty (30) days earnedvacation leave with such leave being fullyvested when earned. In addition, certainemployees may accumulate up to 20additional bonus vacation leave days,which are fully vested when earned. TheBoard records compensated absences ona LIFO basis. The liability as of June 30,2007, represents the value ofaccumulated unpaid vacation leave andsalary related payments as of that date.(See Table V).

50 years20 years

5-20 years8 years

BuildingsImprovementsEquipment and furnitureVehicles

Inventories - The inventories of the Boardare valued at cost and the Board uses thefirst-in, first-out (FIFO) flow assumption indetermining cost. Proprietary Fundinventories consist of food and suppliesand are recorded as expenses whenconsumed.

Capital Assets - The Board I s capital assetsare recorded at original cost. Donatedassets are listed at their estimated fairvalue at the date of donation orforfeiture. Improvements are capitalizedand depreciated over the remaining usefullives of the related capital assets.

It is the policy of the Board to capitalizeall capital assets costing more than$5,000 with an estimated useful life inexcess of one year. The cost of normalmaintenance and repairs that do not addto the value of the asset or materiallyextend asset lives is not capitalized.

Buncombe County holds title to certainproperties, which are reflected as capitalassets in the financial statements of theBoard. The properties have been deededto the County to permit installmentfinancing of construction costs.Agreements between the County and theBoard gives the schools full use of thefacilities, full responsibility formaintenance of the facilities, andprovides that the County will convey title

(STIF). The STIF consists of an internalportion and an external portion in whichthe board participates. Investments arerestricted to those enumerated in G.S.147-69.1.

The Board's investments with a maturityof more than one year at acquisition andnon-money market investments arereported at fair value as determined byquoted market prices. The NCCMT CashPortfolio's securities are valued at fairvalue, which is the NCCMT's share price.The STIF securities are reported at costand maintain a constant $1 per sharevalue. Under the authority of G.S. 14769.3, no unrealized gains or losses of theSTIF are distributed to externalparticipants of the fund. Money marketinvestments that have a remainingmaturity at the time of purchase of oneyear or less are reported at amortizedcost. Non-participating interest earninginvestment contracts are reported atcost.

Cash and Cash Equivalents - The Boardpools money from several funds tofacilitate disbursement and investmentand to maximize investment income.Therefore, all cash and investments areessentially demand deposits and areconsidered cash and cash equivalents.

29

The sick leave policy of the Boardprovides for an unlimited accumulation ofearned sick leave. Sick leave does notvest, but any unused sick leaveaccumulated at the time of retirementmay be used in the determination oflength of service for retirement benefitpurposes. Since the Board has noobligation for accumulated sick leave untilit is actually taken, no accrual for sickleave has been made.

Net Assets/Fund Balances - Net assets inthe government-wide and proprietary fundfinancial statements are classified asinvested in capital assets; net assetsavailable for use by the individual schools;and unrestricted.

In the governmental fund financialstatements, reservations or restrictions offund balance represent amounts that arenot appropriable, are legally segregatedfor a specific purpose, or are restricted bythe grant agreement. Designations offund balance represent tentativemanagement plans that are subject tochange.

State law [G.S. 115C-425(a)] restricts theappropriation of fund balance or fundequity to an amount not to exceed thesum of cash and investments minus thesum of liabilities, encumbrances, anddeferred revenues arising from cash


receipts as those amounts stand at theclose of the fiscal year preceding thebudget year.

The governmental fund types classify fundbalances as follows:

RESERVED

Reserved for prepaids, portion of fundbalance that is not available forappropriation because it represents theyear-end balance of prepaids, which arenot expendable available resources.

Reserved for encumbrances, portion offund balance available to pay for anycommitments related to purchase ordersand contracts that remain unperformed atyear-end;

Reserved by State statute, portion of fundbalance, in addition to reserves forprepaids and reserves for encumbrances,that is not available for appropriation underState law. This amount is usuallycomprised of accounts receivable and duefrom other governments that are not offsetby unearned revenue.

30

UNRESERVED

Designated for subsequent year's budget,portion of fund balance available forappropriation that has been designatedfor the adopted 2007- 2008 budget ordinance.

Undesignated, portion of fund balanceavailable for appropriation that isuncommitted at year-end.

2. DETAIL NOTES ON ALL FUNDS

Assets

Deposits - All of the Board's deposits areeither insured or collateralized by usingthe Pooling Method. Under the PoolingMethod, which is a collateral pool, alluninsured deposits are collateralized withsecurities held by the State Treasurer'sagent in the name of the State Treasurer.Since the State Treasurer is acting in afiduciary capacity for the Board, thesedeposits are considered to be held by theagent in the entity's name. The amountof the pledged collateral is based on anapproved averaging method for noninterest bearing deposits and the actualcurrent balance for interest-bearingdeposits. Depositories using the PoolingMethod report to the State Treasurer theadequacy of their pooled collateralcovering uninsured deposits. The State


Treasurer does not confirm thisinformation with the Board or with theescrow agent. Because of the inability tomeasure the exact amount of collateralpledged for the Board under the PoolingMethod, the potential exists for undercollateralization, and this risk mayincrease in periods of high cash flows.However, the State Treasurer of NorthCarolina enforces strict standards offinancial stability for each depository thatcollateralizes public deposits under thePooling Method. The Board has no policyregarding custodial credit risk fordeposits.

Governmental ActivitiesState OtherPublic Capltll/ Governmentll/

General School Outley Funds Totel

State grants $ 50,698 $838,320 $ 32,014 $ 4,839 $ 925,871Federal grants 3,606 79,489 83,095Buncombe County--

restricted 10,010 10,010Local options sales tax 231,924 231,924Supplemental city school

tax 49,330 49,330Other local 91,437 91,437

$426,995 $838,320 $ 42,024 $ 84,328 $ 1,391,667

Businesstype

Activities

ChildNutrition

$ 9,459

$ 9,459

Depreciation was charged to thegovernmental functions as follows:

Capital Assets - Capital asset activity forthe year ended June 30, 2007, issummarized in Table II.

Due from Other Governments - Amountsdue from other governments at June 30,2007, are summarized in Table I.

$ 2,340,219

2,313,17927,040

$Unallocated depreciationBusiness support services

Investments - At June 30, 2007, theBoard had $21,616 invested with theNorth Carolina Capital ManagementTrust's Term Portfolio which is unrated.The Board had $2,839,054 invested withthe North Carolina Capital ManagementTrust's Cash Portfolio, which carried acredit rating of AAAm by Standard andPoor's. There was $2,333,978 investedwith the State Treasurer in the ShortTerm Investment Fund (STIF). The STIF isunrated and had a weighted averagematurity of 1.6 years at June 30, 2007.The Board has no formal policy formanaging interest rate risk or credit risk.It follows State law.

At June 30, 2007, the Board haddeposits with financial institutions with acarrying amount of $2,832,715 and $-0with the State Treasurer. The bankbalances with the financial institutionsand the State Treasurer were $3,657,591and $401,309, respectively. Of thesebalances, $508,971 was covered byfederal depository insurance and$3,549,929 was covered by collateralheld by authorized escrow agents in thename of the State Treasurer. The Board'spetty cash at June 30, 2007, was $350.

31

Liabilities

Pension Plan Obligations

Teachers and State Employees RetirementSystem - Plan Description. Asheville CitySchools contributes to the statewide


Teachers' and State Employees'Retirement System (TSERS), a costsharing multiple-employer defined benefitpension plan administered by the State ofNorth Carolina. TSERS providesretirement benefits to plan members andbeneficiaries. Article 1 of G.S.

Chapter 135 assigns the authority toestablish and amend benefit provisions tothe North Carolina General Assembly. TheTeachers' and State Employees'Retirement System is included in theComprehensive Annual Financial Report(CAFR) for the State of North Carolina.

Beginning EndingBalances Increases Decreases Transfers Balances

Governmental activities:Capital assets not being depreciated:

Land $ 1,307,576 $ $ $ $ 1,307,576Construction in progress 12,212,538 912,095 (13,053,704) 70,929

Total capital assets not being depreciated 13,520,114 912,095 (13,053,704) 1,378,505Capital assets being depreciated:

Buildings 47,000,397 344,196 12,375,503 59,720,096Equipment and furniture 2,933,243 394,248 (9,003) 13,675 3,332,163Vehicles 1,848,766 28,521 (51,547) 1,825,740Land improvements 2,607,587 59,882 664,526 3,331,995

Total capital assets being depreciated 54,389,993 826,847 (60,550) 13,053,704 68,209,994Less accumulated depreciation for:

Buildings 20,110,849 1,910,591 22,021,440Equipment and furniture 1,716,488 226,538 (9,003) 1,934,023Vehicles 1,493,237 78,100 (51,547) 1,519,790Land improvements 1,408,883 124,990 1,533,873

Total accumulated depreciation 24,729,457 2,340,219 (60,550) 27,009,126

Total capital assets being depreciated, net 29,660,536 41,200,868

Governmental activity capital assets, net $ 43,180,650 $ 42,579,373

Business-type activities:Child Nutrition Fund:

Capital assets being depreciated:Equipment $ 388,667 296,657 (49,439) $ 635,885

Less accumulated depreciation tor:Equipment 332,171 34,228 (36,384) 330,015

Business-type activities capital assets, net $ 56,496 $ 305,870

32

The State's CAFR includes financialstatements and required supplementaryinformation for TSERS. That report maybe obtained by writing to the Office ofthe State Controller, 1410 Mail ServiceCenter, Raleigh, North Carolina 276991410, or by calling (919) 981-5454.

Funding Policy. Plan members are requiredto contribute six percent of their annualcovered salary and the Board is required tocontribute at an actuarially determinedrate. For the fiscal year ended June 30,2007, the Board was required tocontribute 2.66% to TSERS. Thecontribution requirements of plan membersand Asheville City Schools are establishedand may be amended by the NorthCarolina General Assembly. The Board'scontributions to TSERS for the yearsended June 30, 2007, 2006, and 2005were $679,257, $618,504, and$555,183, respectively, equal to therequired contributions for each year.

Post-Employment Benefits - In addition toproviding pension benefits, the Boardprovides disability benefits and postemployment health care benefits anddeath benefits, in accordance with Statestatutes, to certain employees. Thesebenefits are provided through multipleemployer cost-sharing plans administeredby the State. The Board makes monthlycontributions to the State for these


benefits. Health care benefits areprovided to retirees (at no charge to theretirees) of the Teachers' and StateEmployees' Retirement System (System)who have at least five years ofcontributing membership in the System.These benefits are provided through theState's Comprehensive Major MedicalPlan. Once retirees become eligible forMedicare coverage, they must elect toparticipate in Part A and Part B coverageto maintain the level of coverage providedprior to retirement. In addition, personswho became surviving spouses of retireesprior to 'O'ctober 1, 1986, receive thesame coverage as retirees at the State'sexpense.

Other Employment Benefits Deathbenefits are provided through the BenefitPlan for members of the Teachers' andState Employees' Retirement System(Death Benefit Plan), a multiple-employerState-administered cost-sharing planfunded on a one-year term cost basis.Employees who die in active service afterone year of contributing membershipservice in the System, or who die within180 days after retirement or terminationof service and have at least one year ofcontributing membership service in theSystem at the time of death are eligiblefor death benefits. Lump sum deathbenefit payments to beneficiaries areequal to the employee's highest 12

33

months salary in a row during the 24months prior to his/her death with aminimum benefit of $25,000 and amaximum of $50,000.

Short-term and long-term disabilitybenefits are provided through the DisabilityIncome Plan of North Carolina (DisabilityIncome Plan), a multiple-employer Stateadministered cost-sharing plan, which alsois funded on a one-year term cost basis.Long-term disability benefits are payablefrom the Disability Income Plan after theconclusion of the short-term disabilityperiod or after salary continuationpayments cease, whichever is later, for aslong as an employee is disabled. Anemployee is eligible to receive long-termdisability benefits if the followingrequirements are met: 1) the employee hasfive years of contributing membershipservice in the System earned within 96months prior to the end of the short-termdisability period; 2) the employee mustmake application to receive long-termbenefits within 180 days after· theconclusion of the short-term disabilityperiod or after salary continuationpayments cease, whichever is later; and 3)the employee must be certified by theMedical Board to be mentally or physicallydisabled for the further performance ofhis/her occupation; 4) the disability musthave been continuous, likely to bepermanent, and incurred at the time of

active employment; and 5) the employeemust not be eligible to receive anunreduced retirement benefit from theSystem. In addition, recipients of the longterm disability benefits are eligible toreceive State-paid health insurancecoverage. The monthly long-term disabilitybenefit is equal to 65 percent of onetwelfth of an employee's annual base rateof compensation reduced by any socialsecurity or workers' compensation towhich the recipient may be entitled up t<;> amaximum of $3,900 per month, plusadditional minor adjustments. When anemployee qualifies for an unreducedservice retirement allowance from theSystem, the benefits payable from theDisability Income Plan will cease, and theemployee will commence retirement underthe Teachers' and State Employees'Retirement System. Effective August 1,2005, employees that have not yet vestedin the long-term disability plan (i.e.employees that do not have five years ofmembership service as of August 1, 2005)will have to comply with revised standardsto determine long-term disability.

All short-term disability benefit paymentsare made by various State-administeredplans. The Board has no liability beyondpayment of monthly contributions exceptfor short-term disability benefits, whichare paid by the Board during the first sixmonths of the short-term period.


Contributions are determined as apercentage of covered monthly payroll.Annually, the State sets monthlycontribution rates for post-employmenthealth care benefits, death benefits, anddisability benefits, which are the same forall boards of education across the State.For the fiscal year ended June 30, 2007,the Board made contributions to the Statefor post-employment health care benefitsof $970,350, death benefits of $40,857,and disability benefits of $132,785; thesecontributions represented 3.8%, 0.16%,and 0.52% of covered payroll,respectively. The contributions for postemployment health care benefits anddisability benefits cannot be separatedbetween the post employment benefitamounts and the other employee benefitamounts. Because the benefit paymentsare made by the various Stateadministered plans and not by the Board,the Board does not determine the numberof eligible participants.

Supplemental Retirement Plan - Full timeemployees of the school system are alsoeligible for the supplemental retirementplan under Internal Revenue Code Section401 (k). Under this plan, an employee maycontribute a percentage of their annualgross salary as limited by federal tax laws.Asheville City Schools does not make anycontributions to the supplemental retire-

34

ment plan. The employees' contribution tothe 401 (k) plan for 2007 was $276,755.

Accounts Payable

The balance in accounts payable atJune 30, 2007, is summarized in Table III.

Unearned Revenue

The balance in unearned revenue atJune 30,2007, is summarized in Table IV.

Risk Management

The Board is exposed to various risks oflosses related to torts; theft of, damageto, and destruction of assets; errors andomissions; injuries to employees; andnatural disasters. The Board participatesin the North Carolina School Boards Trust(the Trust), a member funded riskmanagement program administered by theNorth Carolina School BoardsAssociation. Through the Trust, the Boardmaintains general liability and errors andomissions coverage of $2 million perclaim, $4 million per coverage periodaggregate. In addition, the Board maintains automobile liability and uninsured/underinsured motorist's coverage limits of$2 million per accident through the Trust.The Trust retention per claim for generalliability and errors and omissions claims is$150,000, and the retention per accidentfor automobile claims is $150,000. The

NOTES TO FINANCIAL STATEM ENTS

Business-type

Govemmental Activities ActivitiesState OtherPublic Capital Governmental Child

General School Outlay Funds Total Nutrition

Vendors $ 186,834 $ $ 13,625 $ 3,401 $ 203,860 $ 3,864Charter schools 1,408 1,408

$ 188,242 $ $ 13,625 $ 3,401 $ 205,268 $ 3,864

The Board maintains workers' compensation coverage up to statutory limits foremployees not paid from state funds

through a commercial carrier. The Stateof North Carolina provides workers'compensation for employees paid fromstate funds.

The Board also participates in theTeachers' and State Employees'Comprehensive Major Medical Plan, aself-funded risk financing pool of theState administered by Blue Cross andBlue Shield of North Carolina. Throughthe Plan, permanent full-time employeesof the Board are eligible to receive healthcare benefits up to a $5 million lifetimelimit. The Board pays the full cost ofcoverage for employees enrolled in theComprehensive Major Medical Plan.

In accordance with G.S. 115C-442, theBoard has purchased a commercial suretybond as a performance bond foremployees who have custody of theBoard's monies at any given time. Thefinance officer is bonded for $200,000. Allother employees that have access to fundsare bonded under a blanket bond for$150,000, with a $10,000 theft,disappearance and destruction limit.

There have been no significant reductionsin insurance coverage in the prior year,and claims have not exceeded coveragein any of the past three fiscal years.

Business-type

Activities

ChildNutrition

$

7,936

$ 7,936

Total

$ 130,930

$ 130,930$ 4,839

property. The Fund purchases excessreinsurance to cover catastrophic eventsin excess of $10 million. Excessreinsurance is purchased throughcommercial insurers. A total limit of $100million per occurrence is purchased. Floodand earthquake damages are subject tolimits of $5 million per occurrence and$15 million aggregate. The Board's floodcoverage is subject to a $25,000deductible.

$

Govemmental ActivitiesState OtherPublic: Capital GovernmentalSc:hool outlay Funds

$ 1,138 $ $ 4,839

$ 1,138

General

$ 124,953

$ 124,953

Trust maintains reinsurance through acommercial company to cover losses inexcess of the retention amounts. Inlandmarine coverage for scheduled equipmentis also maintained through the Trust. TheBoard also participates in the PublicSchool Insurance Fund (the Fund). This isa voluntary, self-insured risk control andrisk-financing fund administered by theNorth Carolina Department of PublicInstruction. The Fund insures tangibleproperty assets of the Board and providesreplacement coverage subject to theadjusted total coverage of all bUildingsand contents listed as scheduled

Grants andcontracts

Prepaidlunch sales

35

Beginning Ending Due inBalances Increases Decreases Balances One Year

Governmental activities:Compensated absences $1,822,227 $1,666,416 $1,634,515 $1,854,128 $ 205,728

Business-type activities:Compensated absences $ 27,450 $ 32,086 $ 36,144 $ 23,392 $ 4,594

Long-Term Obligations

The summary of changes in the Board'slong-term obligations for the year endedJune 30, 2007, is shown in Table V.

Compensated absences are typicallyliquidated by the general and othergovernmental funds.

Interfund Balances and Activity

Transfers to/from other funds - Transfersto/from other funds at June 30, 2007,consist of $58,267 transferred from theState Public School Fund to the ChildNutrition Fund for administrative costs,$296,656 of capital assets transferredfrom the Capital Outlay Fund to the ChildNutrition Fund for items purchased forchild nutrition, $200,000 transferred fromthe General Fund to other governmentalfunds for the individual schools and$74,199 transferred from othergovernmental funds to the general fund forathletic gate receipts.


Due to/from other funds - The balance atJune 30, 2007, consists of amounts owedto the General Fund from the ChildNutrition Fund for operating purposes. Thebalance is expected to be repaid in thenear term.

3. SUPPLEMENTAL CITY SCHOOL TAX

The supplemental city school tax,approved in 1935 by the citizens ofAsheville, is currently 15¢ per $100 ofassessed valuation of taxable propertylocated in the Asheville City SchoolDistrict. The Asheville City SchoolDistrict's boundaries do not coincide withthe City of Asheville corporate limits. Incompliance with North Carolina state law,the supplemental city school tax is levied,billed and collected by Buncombe County.All property taxes, including thesupplemental city school tax, areassessed as of July 1, the beginning ofthe County's fiscal year, and are basedupon 100 percent of the assessed valueas of January 1 the same year.Revaluation of real property, required at

36

least every eight years, was completedduring the Spring of 2006 and waseffective for the levy of taxes for thefiscal year ending June 30, 2007. Theassessed valuation of the propertysubject to the supplemental city schooltax is estimated to be $5.0 billion(unaudited) at June 30, 2007.

4. SUMMARY DISCLOSURE OF CONTINGENCIES

Federal and State Assisted Programs

The Board has received proceeds fromseveral federal and State grants. Periodicaudits of these grants are required andcertain costs may be questioned as notbeing appropriate expenditures under thegrant agreements. Such audits couldresult in the refund of grant moneys tothe grantor agencies. Managementbelieves that any required refunds w ill beimmaterial. No provision has been madein the accompanying financial statementsfor the refund of grant moneys.

Contingent Liabilities

At June 30, 2007, the Board was adefendant to various law suits. In theopinion of the Board's management andthe Board's attorney, the ultimate effectof these legal matters w ill not have amaterial adverse effect on the Board'sfinancial position.

supplementary information

CAPITAL OUTLAY FUND

The Capital Outlay Fund accounts for resources used in the construction, acquisition, repair, and replacement of AshevilleCity Schools' capital assets. Major revenue sources include Buncombe County and the supplemental city school tax. TheCapital Outlay Fund is accounted for using the modified accrual basis of accounting.


CAPITAL OUTLAY FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL


Positive(Negative)

Budget Actual VarianceRevenues:

Local:Buncombe County - unrestricted $ 896,101 $ 896,101 $Buncombe County - restricted 2,129,678 1,561,433 (568,245)Supplemental city school tax 500,000 500,000Other:

Interest earned on investments 40,000 68,797 28,797Other local sources 72,500 90,371 17,871

Total revenues 3,638,279 3,116,702 (521,577)

Expenditures:Capital outlay:

Real property and buildings--Category I projects:Central office/system wide 355,337 63 355,274Asheville High 829,288 377,153 452,135Isaac Dickson 55,000 47,644 7,356Claxton 848,342 709,294 139,048Jones 45,000 40,583 4,417

(continued)

37

Positive(Negative)

BUdget Actual VarianceExpenditures, continued:

Capital outlay, continued:Real property and buildings--Category I projects, continued:

Asheville Middle $ 270,827 $ 136,026 $ 134,801Vance 30,000 24,731 5,269Preschool 37,020 24,881 12,139

Subtotal real property and buildings--Category I projects 2,470,814 1,360,375 1,110,439

Furniture and equipment--Category II projects 755,809 686,422 69,387

Buses and motor vehicles--Category III projects 113,000 29,377 83,623

Total expenditures 3,339,623 2,076,174 1,263,449

Revenues over expenditures 298,656 1,040,528 741,872

Other financing sources (uses):Appropriated fund balance 8,000 (8,000)Contingency (10,000) 10,000Transfers to other funds (296,656) (296,656)

Total other financing sources (uses) (298,656) (296,656) 2,000

Net change in fund balance $ 743,872 $ 743,872

Fund balance:Beginning of year, July 1 644,038

End of year, June 30 $ 1,387,910

38

OTHER GOVERNMENTAL FUNDS

Other Governmental Funds consist of non-major special revenue funds. Asheville City Schools has tv\,{) non-major specialrevenue funds: the Individual Schools Fund and the Federal Grants Fund. Special Revenue Funds are used to account forrevenues that are legally restricted for specific purposes. Special Revenue Funds are accounted for using the modifiedaccrual basis of accounting. Asheville City Schools is only legally required to adopt an annual budget for the Federal GrantsFund. The Federal Grants Fund accounts for appropriations for the expenditure of federal categorical grants made availablethrough the North Carolina Department of Public Instruction. The Individual Schools Fund accounts for contributions fromthe local parent and booster organizations, fund-raising activities, funds held on behalf of various clubs and organizationsand school athletic teams and events.


COMBINING BALANCE SHEET--OTHER GOVERNMENTAL FUNDS

June 30, 2007

Federal IndividualGrants Schools Total

Assets

Cash and cash equivalents $ $ 262,136 $ 262,136Due from other governments 84,328 84,328

Total assets $ 84,328 $ 262,136 $ 346,464

Liabilities and Fund Balances

Liabilities:Accounts payable $ 3,401 $ $ 3,401Accrued salaries and wages payable 76,088 76,088Unearned revenue 4,839 4,839

Total liabilities 84,328 84,328

Fund balances:Unreserved, reported in:

Special Revenue Funds 262,136 262,136

Total liabilities and fund balances $ 84,328 $ 262,136 $ 346,464

39


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES--OTHER GOVERNMENTAL FUNDS



Revenues:U.S. Government $ 3,041,838 $ $ 3,041,838Local 882,172 882,172

Total revenues 3,041,838 882,172 3,924,010

Expenditures:Current:

Instructional programs:Regular 325,068 325,068Special 1,557,406 1,557,406Co-curricular 1,048,188 1,048,188Student services 68,028 68,028Other 731,341 731,341

Support services:Pupil 19,583 19,583Instructional staff 46,260 46,260Administrative 71,197 71,197Business 2,323 2,323Central 50,641 50,641Other 59,958 59,958

Non-programmed charges:Other 110,033 110,033

Total expenditures 3,041,838 1,048,188 4,090,026

(continued)

40


Revenues under expenditures $ $ (166,016) $ (166,016)

Other financing sources (uses):Transfers from other funds 200,000 200,000Transfers to other funds (74,199) (74,199)

Total other financing sources 125,801 125,801

Net change in fund balances (40,215) (40,215)Fund balances--beginning 302,351 302,351

Fund balances--ending $ $ 262,136 $ 262,136

41


FEDERAL GRANTS FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE--BUDGET AND ACTUAL


42

CHILD NUTRITION FUND

The Child Nutrition Fund uses the full accrual basis of accounting. The Child Nutrition Program provides breakfast and lunchto students in the Asheville City Schools. Primary revenue sources are meal charges, federal commodity subsidies, andUSDA reimbursements.


CHILD NUTRITION FUND

SCHEDULE OF REVENUES AND EXPENDITURESuBUDGET AND ACTUAL (Non-GAAP)


Positive(Negative)

Budget Actual VarianceOperating revenues:

Food sales $ 448,433 $ 507,117 $ 58,684

Operating expenditures:Purchase of food 773,980 728,106 45,874Salaries and benefits 899,624 863,325 36,299Materials and supplies 69,200 61,810 7,390Other 19,000 19,697 (697)

Total operating expenditures 1,761,804 1,672,938 88,866

Operating loss (1,313,371 ) (1,165,821 ) 147,550

Non-operating revenues:Federal reimbursements 788,000 795,124 7,124Federal commodities 62,960 64,782 1,822State reimbursement 105,567 105,481 (86)Interest earned 1,834 1,819 (15)

Total non-operating revenues 958,361 967,206 8,845

Revenues under expenditures before other financing sources (355,010) (198,615) 156,395

Other financing sources:Transfers from other funds 355,010 354,923 (87)

Revenues and other sources over expenditures $ 156,308 $ 156,308

Reconciliation of modified accrual to full accrual basis:Reconciling items:

Depreciation (34,228)Loss on disposal of assets (3,694)Decrease in compensated absences 4,058Decrease in inventories of food and supplies, net (12,276)Decrease in unearned revenue 9

Change in net assets $ 110,177

43

AGENCY FUND

The Agency Fund is used to account for assets held by the Board as an agent for the benefit of various scholarship andaward funds, the Asheville City Schools Foundation, the Asheville City Schools Pool Committee, the Educational AccessChannel Consortium, and the Medical Reimbursement Plan.


AGENCY FUND

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES


Beginning EndingBalance Additions Deletions Balance

ASHEVILLE CITY SCHOOLS FOUNDATION:Assets:

Cash and cash equivalents $ 714,932 $ 81,040 $ 58,200 $ 737,772

Liabilities:Due to other sources $ 714,932 $ 81,040 $ 58,200 $ 737,772

ASHEVILLE HIGH AWARDS:Assets:

Cash and cash equivalents $ 19,929 $ 915 $ 1,802 $ 19,042

Liabilities:Due to other sources $ 19,929 $ 915 $ 1,802 $ 19,042

ASHEVILLE CITY SCHOOLS POOL COMMITTEE:Assets:

Cash and cash equivalents $ 638,676 $ 29,439 $ 500 $ 667,615

Liabilities:Due to other sources $ 638,676 $ 29,439 $ 500 $ 667,615

EDUCATIONAL ACCESS CHANNEL CONSORTIUM:Assets:

Cash and cash equivalents $ 230,332 $ $ 10,597 $ 219,735

Liabilities:Due to other sources $ 230,332 $ $ 10,597 $ 219,735

MEDICAL REIMBURSEMENT PLAN:Assets:

Cash and cash equivalents $ 5,490 $ 178,762 $ 184,252 $

Liabilities:Due to other sources $ 5,490 $ 178,762 $ 184,252 $

TOTAL--AGENCY FUND:Assets:

Cash and cash equivalents $ 1,609,359 $ 290,156 $ 255,351 $ 1,644,164Liabilities:

Due to other sources $ 1,609,359 $ 290,156 $ 255,351 $ 1,644,164

44

CAPITAL ASSETS

Asheville City Schools capitalizes all items costing $5,000 or more 'that have a useful life in excess of one year. Items arerecorded at cost or, if donated, at fair market value \I\A1en donated.


SCHEDULE OF CAPITAL ASSETS BY FUNCTION AND SOURCE

June 30, 2007

Furniture,Land Construction Equipment

Land Improvements Buildings in Progress and Vehicles TotalBY FUNCTION

Instructional:Elementary $ 781,326 $ 1,097,256 $ 26,754,000 $ $ 830,931 $ 29,463,513Middle 226,550 171,337 10,608,716 438,370 11,444,973High 229,500 1,928,509 18,951,822 70,929 1,089,269 22,270,029Special 40,200 127,009 1,746,051 130,191 2,043,451

Administrative:General 30,000 7,884 1,659,507 843,402 2,540,793Transportation 1,825,740 1,825,740

Total capital assetsby function $ 1,307,576 $ 3,331,995 $ 59,720,096 $ 70,929 $ 5,157,903 $ 69,588,499

BY SOURCE

Capital Projects Fund $ 1,307,576 $ 3,229,269 $ 59,708,089 $ 70,929 $ 4,612,215 $ 68,928,078General Fund 87,304 12,007 231,714 331,025Special Revenue Fund 15,422 206,085 221,507Donations 107,889 107,889

Total capital assetsby source $ 1,307,576 $ 3,331,995 $ 59,720,096 $ 70,929 $ 5,157,903 $ 69,588,499

45


SCHEDULE OF CHANGES IN CAPITAL ASSETS BY FUNCTION AND SOURCE


Instructional AdministrativeBY FUNCTION Elementary Middle High Special General Transportation Total

Capital assets--July 1, 2006 $ 28,642,137 $ 11,296,183 $ 21,611,317 $ 2,023,526 $ 2,488,178 $ 1,848,766 $ 67,910,107

Additions:Capital Projects Fund 821,376 157,793 634,925 19,925 70,075 28,521 1,732,615General Fund 6,327 6,327

Total additions 821,376 157,793 634,925 19,925 76,402 28,521 1,738,942

Deletions and transfers (9,003) 23,787 (23,787) (51,547) (60,550)

Capital assets--June 30, 2007 $ 29,463,513 $ 11,444,973 $ 22,270,029 $ 2,043,451 $ 2,540,793 $ 1,825,740 $ 69,588,499

Furniture,Land Construction Equipment

BY SOURCE Land Improvements BUildings In Progress and Vehicles Total

Capital assets--July 1, 2006 $ 1,307,576 $ 2,607,587 $ 47,000,397 $ 12,212,538 $ 4,782,009 $ 67,910,107

Additions:Capital Projects Fund 59,882 344,196 912,095 416,442 1,732,615General Fund 6,327 6,327

Total additions 59,882 344,196 912,095 422,769 1,738,942

Deletions and transfers 664,526 12,375,503 (13,053,704) (46,875) (60,550)

Capital assets--June 30, 2007 $ 1,307,576 $ 3,331,995 $ 59,720,096 $ 70,929 $ 5,157,903 $ 69,588,499

46

StAtIStIcAL SectIon

StAtIStIcAL SectIon

STATISTICAL SECTION

The Statistical Section presents detailed information as a context for understanding vvtlat the information in the financialstatements, note disclosures and required supplementary information says about Asheville City Schools' overall financialhealth. The schedules included in this section can be categorized as follovvs:

Financial Trends SchedulesThese schedules contain trend information to help the reader understand how the government~s financialperformance and well-being have changed over time.

Revenue Capacity SchedulesThese schedules contain information ,to help the reader assess one of the government's most significant localrevenue sources, the Asheville City Schools' supplemental city school tax.

Debt Capacity SchedulesNo schedules for debt capacity are included since the Board's long-term obligations are limited tocompensated absences to be paid from governmental and proprietary funds.

Demographic and Economic Information SchedulesThese schedules offer demographic and economic indicators to help the reader understand the environmentwithin which the government's financial activities take place.

Operating Information SchedulesThese schedules contain service and infrastructure data to help the reader understand how the information inthe government's financial report relates to the services the government provides and the activities itperforms.

The schedule type or category is listed in the upper right-hand corner on each of the attached schedules. Unlessotherwise noted, the information shovvn on the attached schedules was derived from the comprehensive annual financialreports for the relevant year. Asheville City Schools implemented GASB Statement No. 34 in fiscal year 2003; schedulespresenting government-wide information include information beginning in that year.

Financial TrendsSchedule 1

ASHEVILLE CITY SCHOOLSNET ASSETS BY COMPONENT

Last Five Fiscal Years(accrual basis of accounting)

Fiscal Year2007 2006 2005 2004 2003

Governmental activitiesInvested in capital assets $ 42,579,373 $ 43,180,650 $ 36,145,142 $ 34,012,521 $ 32,814,131Restricted 262,136 302,351 231,236 243,775 274,267Unrestricted 4,326,808 3,690,580 4,298,275 4,323,515 3,158,125

Total governmental activities net assets $ 47,168,317 $ 47,173,581 $ 40,674,653 $ 38,579,811 $ 36,246,523

Business-type activitiesInvested in capital assets $ 305,870 $ 56,496 $ 83,170 $ 81,624 $ 95,560Unrestricted (118,922) 20,275 162,616 256,026 286,422

Total business-type activities net assets $ 186,948 $ 76,771 $ 245,786 $ 337,650 $ 381;982

Government-wideInvested in capital assets $ 42,885,243 $ 43,237,146 $ 36,228,312 $ 34,094,145 $ 32,909,691Restricted 262,136 302,351 231,236 243,775 274,267Unrestricted 4,207,886 3,710,855 4,460,891 4,579,541 3,444,547

Total government·wide net assets $ 47,355,265 $ 47,250,352 $ 40,920,439 $ 38,917,461 $ 36,628,505

Note: Asheville City Schools.began to report accrual information when it implemented GASB Statement 34 in 2003.

47


ASHEVILLE CITY SCHOOLSEXPENSES, PROGRAM REVENUES AND NET (EXPENSE)


Fiscal Year2007 2006 2005 2004 2003

ExpensesGovernmental activities:

Instructional programs $ 32,144,863 $ 30,113,067 $ 28,747,566 $ 27,924,801 $ 27,060,043Support services 11,579,037 11,217,031 10,601,184 10,126,909 9,650,031Unallocated depreciation expense 2,313,179 1,908,699 1,632,260 1,537,735 1,492,569Other 624,887 603,596 555,921 529,272 393,149

Total governmental activities expenses 46,661,966 43,842,393 41,536,931 40,118,717 38,595,792

Business-type activities:Child nutrition 1,719,078 1,621,843 1,589,636 1,558,638 1,559,570

Total government-wide expenses 48,381,044 45,464,236 43,126,567 41,677,355 40,155,362

Program RevenuesGovernmental activities:

Charges for services 1,443,047 1,395,058 1,400,493 1,449,022 1,360,763Operating grants and contributions 25,468,050 24,621,723 23,449,502 23,121,865 22,622,287Capital grants and contributions 5,588 23,345 16,779 20,718 65,908

Total governmental activities program revenues 26,916,685 26,040,126 24,866,774 24,591,605 24,048,958

Business-type activities:Charges for services 507,126 446,497 492,729 531,832 552,360Operating grants and contributions 965,387 929,235 919,137 916,443 917,825

Total business-type activities program revenues 1,472,513 1,375,732 1,411,866 1,448,275 1,470,185

Total government-wide program revenues 28,389,198 27,415,858 26,278,640 26,039,880 25,519,143

Net (Expense) $(19,991,846) $(18,048,378) $(16,847,927) $(15,637,475) $(14,636,219)

Note: Asheville City Schools began to report accrual information when it implemented GASB Statement 34 in 2003.

48

ASHEVILLE CITY SCHOOLSGENERAL REVENUES AND TOTAL CHANGE IN NET ASSETS



Fiscal Year2007 2006 2005 2004 2003

Net (Expense)Total government-wide net (expense) $(19,991,846) $(18,048,378) $(16,847,927) $(15,637,475) $(14,636,219)

General revenues and transfers:Governmental activities:

State of North Carolina - restricted construction proceeds 450,000 213,738 1,361,964 232,800Buncombe County - restricted construction proceeds 1,561,433 7,159,805 2,576,052 555,244 1,617,478Buncombe County - unrestricted 6,834,500 6,432,698 6,210,175 6,027,697 5,754,619Supplemental city school tax 7,402,672 6,677,152 6,441,256 6,351,447 6,235,382Local option sales tax 3,125,067 2,848,259 2,554,471 2,614,357 2,009,599Other revenues 1,171,268 793,963 848,660 1,012,357 1,042,384Transfers (out) (354,923) (60,682) (79,353) (62,666) (54,422)

Total governmental activities general revenues and transfers 19,740,017 24,301,195 18,764,999 17,860,400 16,837,840

Business-type activities:Other revenues 1,819 16,414 6,553 3,365 4,074Transfers in 354,923 60,682 79,353 62,666 54,422

Total business-type activities general revenues and transfers 356,742 77,096 85,906 66,031 58,496

Total government-wide general revenues and transfers 20,096,759 24,378,291 18,850,905 17,926,431 16,896,336

Change in Net Assets $ 104,913 $ 6,329,913 $ 2,002,978 $ 2,288,956 $ 2,260,117

Notes: Asheville City Schools began to report accrual information when it implemented GASS Statement 34 in 2003.

49

ASHEVILLE CITY SCHOOLSFUND BALANCES ... GOVERNMENTAL FUNDS

Last Ten Fiscal Years(modified accrual basis of accounting)


Fiscal Year2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

General FundReserved $ 630,740 $ 599,109 $ 612,234 $ 524,201 $ 399,131 $ 188,591 $ 265,821 $ 223,812 $ 276,510 $ 270,073Unreserved 4,162,286 4,269,660 4,563,270 4,564,282 3,342,002 2,682,279 2,462,370 2,581,664 2,662,549 2,459,667

Total general fund $ 4,793,026 $ 4,868,769 $ 5,175,504 $ 5,088,483 $ 3,741,133 $ 2,870,870 $ 2,728,191 $ 2,805,476 $ 2,939,059 $ 2,729,740

All Other Governmental FundsReserved $ 182,615 $ 635,076 $ 434,557 $ 653,983 $ 360,076 $ 410,605 $ 632,161 $ 597,242 $ 416,308 $ 123,512Unreserved, reported in:

Capital projects fund 1,205,295 8,962 528,302 389,484 829,355 502,860 335,028 328,416 692,199 871,707Special revenue funds 262,136 302,351 231,236 243,775 274,267 253,071 221,678 244,348 213,102 191,943

Total all other governmental funds $ 1,650,046 $ 946,389 $ 1,194,095 $ 1,287,242 $ 1,463,698 $ 1,166,536 $ 1,188,867 $ 1,170,006 $ 1,321,609 $ 1,187,162

50

ASHEVILLE CITY SCHOOLSCHANGES IN FUND BALANCES .. GOVERNMENTAL FUNDS

Last Ten Fiscal Years(modified accrual basis of accounting)


Fiscal Year2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

Revenues:State of North Carolina $ 20,987,659 $20,654,243 $19,360,866 $20,302,734 $19,043,498 $20,104,313 $20,970,020 $20,506,522 $18,997,967 $18,041,616U. S. Government 4,275,071 4,296,347 4,130,198 4,108,617 3,759,971 3,297,014 3,424,341 2,576,266 2,744,576 2,616,721Local sources:

Buncombe County - unrestricted 7,125,864 6,699,943 6,456,646 6,276,519 5,981,751 5,976,985 6,018,020 5,693,263 5,447,319 5,385,297Buncombe County - restricted 1,561,433 7,159,805 2,576,052 555,244 1,617,478 1,810,580 1,981,665 1,577,607 97,101 558,301Supplemental city school tax 7,402,672 6,677,152 6,441,256 6,351,447 6,235,382 5,049,320 5,017,189 4,947,268 4,829,515 4,027,933Local option sales tax 3,125,067 2,848,259 2,554,471 2,614,357 2,009,599 1,946,115 2,030,467 1,905,834 1,691,757 1,592,231Other local revenues 2,637,892 2,212,199 2,349,424 2,437,197 2,349,344 2,361,952 2,507,937 2,508,631 2,467,352 1,914,407

Total revenues 47,115,658 50,547,948 43,868,913 42,646,115 40,997,023 40,546,279 41,949,639 39,715,391 36,275,587 34,136,506

Expenditures:Instructional programs 31,764,836 30,193,557 28,740,482 27,905,800 26,903,434 26,946,062 28,266,185 26,780,651 25,094,502 22,975,044Support services 11,559,015 10,942,004 10,353,467 9,627,553 9,120,717 9,091,328 9,184,766 8,871,207 8,348,179 8,385,379Capital Outlay 2,076,174 9,226,526 4,076,464 3,291,559 2,755,271 3,932,869 3,990,434 3,828,347 2,058,224 1,838,733Other 732,796 679,620 625,273 587,643 444,635 403,416 515,436 470,920 382,401 229,251

Total expenditures 46,132,821 51,041,707 43,795,686 41,412,555 39,224,057 40,373,675 41,956,821 39,951,125 35,883,306 33,428,407

Revenues over (under) expenditures 982,837 (493,759) 73,227 1,233,560 1,772,966 172,604 (7,182) (235,734) 392,281 708,099

Other financing (uses)Transfers from other funds 274,199 250,559 251,073 264,840 248,663 237,011 235,938 232,494 247,000 200,771Transfers to other funds (629,122) (311,241) (330,426) (327,506) (303,085) (289,267) (287,180) (281,946) (295,515) (247,229)

Total other financing (uses) (354,923) (60,682) (79,353) (62,666) (54,422) (52,256) (51,242) (49,452) (48,515) (46,458)

Extraordinary item (692,567)

Net change in fund balances $ 627,914 $ (554,441) $ (6,126) $ 1,170,894 $ 1,025,977 $ 120,348 $ (58,424) $ (285,186) $ 343,766 $ 661,641

Note: The extraordinary item recorded in fiscal year 2003 was the payment of a summary judgement ruled against Asheville City Schools.

51

Revenue Capacity

ASHEVILLE CITY SCHOOLSSchedule 6

ASSESSED VALUE OF TAXABLE PROPERTYSupplemental City School Tax

Last Ten Fiscal Years(in thousands)

Actual Value - Asheville City School DistrictPublic Total Direct

Fiscal Real Personal Service Taxable TaxYear Property Property Companies Value Rate

2007 $ 4,370,104 $ 486,341 $ 88,824 $ 4,945,269 $ 0.15

2006 2,796,592 454,223 96,752 3,347,567 0.20

2005 2,691,470 418,201 97,959 3,207,630 0.20

2004 2,646,183 424,238 97,668 3,168,089 0.20

2003 2,628,502 435,069 88,802 3,152,373 0.20

2002 1,986,212 438,879 99,264 2,524,355 0.20

2001 1,952,940 451,312 97,305 2,501,557 0.20

2000 1,926,788 441,623 101,506 2,469,917 0.20

1999 1,900,253 408,255 100,416 2,408,924 0.20

1998 1,424,036 346,087 95,401 1,865,524 0.21

Source: Buncombe County Tax DepartmentNotes: Property is assessed at market value. Properties are reassessed every four years.

The tax rate is per $100 of assessed value.

52

ASHEVILLE CITY SCHOOLSDirect and Overlapping Property Tax Rates

Last Ten Fiscal Years

Direct Overlapping Rates TotalFiscal Supplemental Buncombe City of CombinedYear City School Tax County Asheville Rate

2007 $ 0.1500 $ 0.5300 $ 0.4238 $ 1.1038

2006 0.2000 0.5900 0.5300 1.3200

2005 0.2000 0.5900 0.5300 1.3200

2004 0.2000 0.5900 0.5300 1.3200

2003 0.2000 0.5900 0.5300 1.3200

2002 0.2000 0.6300 0.5600 1.3900

2001 0.2000 0.6300 0.5600 1.3900

2000 0.2000 0.6300 0.5600 1.3900

1999 0.2000 0.6300 0.5200 1.3500

1998 0.2100 0.7300 0.5700 1.5100

Source: Buncombe County Tax Department.Note: Rates are per $100 of assessed valuation.

53

Revenue CapacitySchedule 7

ASHEVILLE CITY SCHOOLSPRINCIPAL PROPERTY TAX PAYERS

Supplemental City School TaxYear Ended June 30, 2007

Revenue CapacitySchedule 8

Taxable PercentageValue of Total

Taxpayer Business (in thousands) Taxable Value

Jack Tar/Grove Park Inn Hotels/Convention Services $ 102,481 2.1%

Carolina Power & Light Electric Utility 57,402 1.2%

HGA Development LLC Real Estate/Commercial Office 22,289 0.5%

Nesbitt Asheville Venture LLC Hotels/Convention Services 20,373 0.4%

BellSouth Telephone Co. Communications 19,122 0.4%

Grove Park Inn Hotels/Convention Services 16,485 0.3%

Campus Crest of Asheville LLC Real Estate/Apartments 13,663 0.3%

Pack Square Investors LLC Real Estate/Commercial Office 13,292 0.3%

Country Club of Asheville Inc. Real Estate/Private Golf Club 13,236 0.3%

Tower Associates Inc. Real Estate/Commercial Office 13,027 0.3%

Source: Buncombe County Tax Department.Note: Comparable information for the fiscal period ended nine years prior to June 30, 2007 is not available.

54

Revenue Capacity


PROPERTY TAX LEVIES AND COLLECTIONSSupplemental City School Tax

Last Ten Fiscal Years(in thousands)

Percentageof Current

Fiscal Total Current Tax Prior Tax Total Tax CollectionsYear Tax Levy Collections Collections Collections to Levy

2007 $ 7,391 $ 7,362 $ 41 $ 7,403 99.6%

2006 6,668 6,635 42 6,677 99.5%

2005 6,411 6,384 57 6,441 99.6%

2004 6,320 6,285 66 6,351 99.4%

2003 6,248 6,178 57 6,235 98.9%

2002 5,045 4,999 50 5,049 99.1%

2001 4,996 4,960 57 5,017 99.3%

2000 4,932 4,882 65 4,947 99.0%

1999 4,830 4,776 54 4,830 98.9%

1998 3,943 3,934 94 4,028 99.8%

Sources: Buncombe County Tax Department and District records.Note: The total tax levy includes penalties assessed and releases or discoveries made after the

original assessment of taxable value.

55

ASHEVILLE CITY SCHOOLSDemographic and Economic Statistics for Buncombe County


Demographic and EconomicSchedule 10

Estimated Personal Per Capita EstimatedFiscal Population Income Personal Median UnemploymentYear (in thousands) (in thousands) Income Age Rate

2007 Unavailable Unavailable Unavailable Unavailable 4.0

2006 220 Unavailable Unavailable 40 4.0

2005 218 $ 6,585,970 $ 30,158 40 4.6

2004 216 6,047,658 28,037 40 3.4

2003 215 5,681,883 26,672 39 4.0

2002 212 5,671,946 26,952 38 4.6

2001 206 5,629,127 27,020 39 2.6

2000 196 5,524,659 26,693 40 2.5

1999 195 5,235,973 25,624 39 2.1

1998 193 5,046,378 25,022 39 2.6

Sources: Buncombe County Finance Department.Note: Information presented is not separately identifiable for Asheville City Schools.

56

ASHEVILLE CITY SCHOOLSPRINCIPAL EMPLOYERSYear Ended June 30, 2007

Employer

Mission Health & Hospitals

Buncombe County Government

The Grove Park Inil Resort & Spa

City of Asheville

University of North Carolina at Asheville

Asheville City Schools

Asheville~8uncombeTechnical Community College

Asheville-Citizen Times

United States Postal Service ~ Asheville Facility

Wal-Mart Stores, Inc.

Rank Employees

6,000

2 1,700

3 1,100

4 1,000

5 700

6 675

7 350

8 300

9 250

10 240

Demographic and EconomicSchedule 11

Source: Asheville Area Chamber of CommerceNote: Comparable information for the fiscal period ended nine years prior

to June 30, 2007 is not available.

57

ASHEVILLE CITY SCHOOLSNUMBER OF PERSONNEL


INumber of personnell

1998 1999 2000 2001 2002 2003 2004 2005 2006

IIaOTHER .CERTIFIED I

Ratio ofOther Average Pupils to

Certified Operating Daily CertifiedYear Ended June 30: Personnel Personnel Total Membership Personnel

2007 417 258 675 3,730 8.92006 407 262 669 3,753 9.22005 405 288 673 3,789 9.42004 407 270 677 3,789 9.32003 397 271 668 3,864 9.72002 404 267 671 3,904 9.72001 406 274 680 3,937 9.72000 406 296 702 4,027 9.91999 412 306 718 4,212 10.21998 419 311 730 4,217 10.1

Source: Asheville City Schools Human Resources Department.Note: Certified Personnel Includes teachers, librarians, counselors, principals,

assistant princip~ls and certified p~rsonnel working in the Administrative Offices.

58

OperatingSchedule 12

FiscalYear

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

Operating


OPERATING STATISTICSLast Ten Fiscal Years

North Carolina Students ReceivingAverage Average Per Pupil Free or

Daily Daily Per Pupil Expenditure Reduced-Price Student Racial/Ethnic CompositionMembership Attendance Expenditure Rank Meals Black White Other

3,730 3,546 $ 11,506 Fourth 48.9% 42.4% 50.7% 6.9%

3,753 3,543 10,856 Fourth 51.3% 43.5% 50.0% 6.5%

3,789 3,560 10,210 Fourth 50.3% 43.7% 50.3% 6.0%

3,789 3,579 10,102 Third 52.2% 45.7% 49.3% 5.0%

3,864 3,665 9,273 Third 51.6% 45.0% 50.8% 4.2%

3,904 3,703 9,229 Third Unavailable 45.4% 50.4% 4.2%




4,217 3,978 7,529 Fourth Unavailable 43.5% 53.4% 3.1%

Sources: Asheville City Schools Child Nutrition Department, Students Receiving Free or Reduced-Price Meals.North Carolina Department of Public Instruction, all other information reported.

Notes: The amounts shown for per pupil expenditures represent the per pupil expenditures as computed and reported by the North CarolinaDepartment of Public Instruction (NCDPI). NCDPI computes this statistic by dividing current expense expenditures by average dailymembership. Consequently, capital expense expenditures and certain other expenditures (community services, Head Start, and inter/intra fund transfers) are excluded to improve the comparability of per pupil expenditures between fiscal years and between otherNorth Carolina school districts. This computation is considered the official per pupil expenditure reported for Asheville City Schools.

59

ASHEVILLE Cny SCHOOLSTEACHERS' SALARIESLast Ten Fis,cal Ye,ars


1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

!Teachers' salariesl

I-e-Minimum ~Average-Maximum ~

80

70

60

{l50cc~40o~30

20

10

o

----... -~

.

"'~ -.,...-

Year Ended June 30: Minimum Maximum Average

2007 $30,933 $68,904 $44,542

2006 28,248 64,219 42,465

2005 27,396 63,294 41,597

2004 27,396 60,942 41,601

2003 27,396 60,942 41,941

2002 27,396 59,718 41,831

2001 27,125 58,457 41,077

2000 25,974 53,859 38,871

1999 24,833 50,292 36,718

1998 23,811 45,954 34,356

Source: Asheville City Schools Business and Financial SelVices.Note: Th~ above table includes base pay from the state salary SchE~dule and the systemwide local salary supplement.

60

Operating


SCHOOL BUILDING INFORMATIONLast Ten Fiscal Years

School 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

ElementaryClaxton

Square feet 81,193 78,711 78,711 64,146 64,146 64,146 64,146 64,146 64,146 64,146Capacity 480 480 480 432 432 432 432 432 432 432First month membership 386 387 395 388 382 396 397 417 457 437

DicksonSquare Feet 75,926 75,926 75,926 75,926 75,926 75,926 75,926 75,926 75,926 75,926Capacity 449 449 449 449 449 449 449 449 449 449First month membership 388 413 416 361 355 351 338 321 332 311

Hall FletcherSquare Feet 88,205 88,205 88,205 88,205 88,205 88,205 88,205 88,205 88,205 88,205Capacity 455 455 455 455 455 455 455 455 455 455First month membership 292 286 290 271 281 269 265 299 298 308

JonesSquare Feet 85,162 85,162 85,162 85,162 85,162 85,162 85,162 85,162 85,162 85,162Capacity 450 450 450 450 450 450 450 450 450 450First month membership 356 379 368 370 403 307 344 347 407 442

RandolphSquare Feet See See See See See 56,819 56,819 56,819 56,819 56,819Capacity Notes Notes Notes Notes Notes 384 384 384 384 384First month membership Below Below Below Below Below 139 148 171 195 207

VanceSquare Feet 69,965 69,965 69,965 69,965 69,965 69,965 69,965 69,283 69,283 69,283Capacity 422 422 422 422 422 422 422 422 422 422First month membership 353 317 328 314 295 371 394 401 403 433

(continued)

61


School 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

MiddleAsheville Middle

Square Feet 170,418 170,418 170,418 170,418 170,418 170,418 170,418 170,418 170,418 170,418Capacity 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064 1,064First month membership 648 654 677 745 813 788 783 766 862 845

Accelerated Learning CenterSquare Feet See See See See See 58,387 58,387 58,387 58,387 58,387Capacity Notes Notes Notes Notes Notes 319 319 319 319 319First month membership Below Below Below Below Below 55 73 76 86 88

Randolph Learning CenterSquare Feet 56,819 56,819 56,819 56,819 56,819 See See See See SeeCapacity 384 384 384 384 384 Notes Notes Notes Notes NotesFirst month membership 132 176 172 169 110 Below Below Below Below Below

HighAsheville High

Square Feet 365,441 353,041 353,041 353,041 353,041 353,041 349,445 349,445 349,445 349,445Capacity 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500First month membership 1,222 1,203 1,221 1,227 1,248 1,269 1,263 1,255 1,216 1,198

Sources: District records and North Carolina Department of Public Instruction, Insurance SectionNotes: Prior to fiscal year 2003, Jones and Randolph Elementary Schools were paired schools. Jones served students from kindergarten

through third grade, and Randolph served students in fourth and fifth grades. Those schools were consolidated at the beginning ofthe 2002-2003 school year into one elementary school serving kindergarten through fifth grades at the Jones Elementary Schoolsite. At the same time, the Accelerated Learning Center was moved to the former Randolph Elementary School site and theschool name was changed to the Randolph Learning Center.

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The Asheville City School System does not discriminate on the basis of race, color, religion, sex, age, national origin, or disability in admission, access, treatment, or employment in its programs and activities.

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